An outside panel of economists and housing experts are evenly split on whether sales will rise or fall in 2022, as concerns over worsening affordability continue to collide with expectations for rising inventories.
When asked whether sales are projected to rise or fall in 2022 compared to 2021, 41% of participants in the latest Zillow® Home Price Expectations Survey (ZHPES) said sales will grow, 41% predict a slowdown, and 18% believe sales will remain around the same.
Some 6.32 million homes were sold from January through November of 2021, the most sales in that time period since 2006. Of those, an average of 5.61 million were existing homes. Zillow's forecast calls for sales of existing homes to increase a bit in 2022, drawing on recent sales performance, household formation rates, and the expectation that mortgage rates will remain relatively low, offering attractive financing for homebuyers.
"In America's frenzied pandemic-era housing market, buyers and sellers have both defied expectations: Buyers have forged on in the face of record-fast price appreciation, and homeowners have steadfastly demurred from cashing in on this selling opportunity," said Jeff Tucker, Senior Economist at Zillow.
Panelists who foresee lower sales in 2022 point to financial strains on buyers as the main driving factors. Worsening home affordability was cited by 54% of respondents as the most important reason for a sales decline, while higher mortgage rates were noted by 28%. As home values skyrocketed in 2021—up a record 19.3% year-over-year in November—where affordability saw its greatest decline since at least 2014.
"The outlook for home sales in 2022 hinges on which side yields first. If buyers finally balk at unaffordable prices, sales volumes could fall. But if homeowners finally start listing their homes en masse, we could see a sales bonanza, cooling the pace of appreciation. Our expert survey panel was split right down the middle on which scenario to expect," Tucker said.
Among those panelists who anticipate an increase in sales, additional inventory is overwhelmingly cited as the key; 51% said an increase in existing homes listed for sale will be the most important factor, while 21% pointed to more new homes being completed and listed for sale. Inventory began to recover through the summer of 2021, but lost ground in the fall.
Over the past two years, home value growth in many large metros has been higher in areas with longer commutes to the downtown core, a reversal of past trends. Most ZHPES panelists believe these trends will continue in 2022, with 46% expecting growth rates in downtown to slow more than those farther out, compared to 34% who believe downtown values will rise faster than those in suburban areas.
Faith that the shift to working from home is becoming more permanent and pronounced was the top reason behind respondents' confidence in the suburbs. A demographic shift scored second, as growing waves of young people form families and move to larger homes. Pandemic-related health concerns for dense living conditions and a loss of urban amenities due to COVID-19 were rated the least impactful.
Although every respondent in the latest survey expects nationwide home price appreciation to slow in 2022 from last year's record-breaking pace, the average of their long-term projections remains among the most bullish outlooks for home values in ZHPES history. On average, panelists expect home values to grow another 6.6% this year, and by 23.5% over the coming five years.
"Although a handful of experts foresee a modest price correction on the horizon, none expect a crash, even as the confluence of unusual forces impacting U.S. housing markets continues to generate significant uncertainty," said Founder of Pulsenomics, Terry Loebs.
Loebs said the range of home price predictions from panel participants is the widest he's seen. The optimistic group of experts expects more than 37% cumulative home value appreciation through 2026, while the most pessimistic group expects a gain of less than 8% over the same period.