“It's tough to make predictions, especially about the future.” Yogi Berra
It’s the time of year where 2022 housing market predictions begin to appear. Zillow weighed in with their prediction for a national pricing rise of 14-16%. But then again, these are the same people who just shut down their instant offers because their algorithms on future market pricing didn’t work. Core Logic predicts a national housing price appreciation of only 1.9% due to rising interest rate concerns. But they predicted a drop in values last year of 6.6% and instead soaring prices occurred. Zelman & Associates warns that investors are over-building and over-buying given the weak population growth and low household formation. They wisely have avoided predicting numbers.
We tend to side with Yogi. Predicting home prices nationally is a ridiculous exercise. Housing markets are local – and at times even local markets will appreciate at different rates based on the area and differing price points. What can we safely say is true is this:
• The market frenzy that was triggered 3Q of 2020 and through the first half of 2021 appears to be behind us. This means that it is highly unlikely we will see the unsustainable price appreciation of 30%+ again. More realistic estimates land in the 7-10% annual growth range for 2022.
• Ultimately pricing is a supply and demand issue. Price is a trailing indicator. For prices to stop rising, supply will need to exceed demand. That takes time. So it is very safe to predict rising prices in the first half of 2022. Saying that a frenzy has ended does not mean price increases have ended.
• Rising prices in a normal market dampens demand. This has already begun and will likely strengthen in 2022. Seller behavior will need to change to accommodate less buyers.
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Russell & Wendy Shaw