Realtor.com’s 2022 Housing Forecast has concluded that U.S. home buyers will have a better chance to find the home of their dreams in 2022, but will face a competitive seller's market, as first-time buyer demand will continue to outpace the nation’s recovering inventory.
Authored by Danielle Hale, George Ratiu, Sabrina Speianu, Jiayi Xu, and Hannah Jones, Realtor.com predicts that with listing prices, rent and mortgage rates all expected to climb, 2022 will offer a mixed bag of both affordability challenges and opportunities.
"Whether the pandemic delayed plans or created new opportunities to make a move, Americans are poised for a whirlwind year of home buying in 2022,” said Realtor.com Chief Economist Danielle Hale. “With more sellers expected to enter the market as buyer competition remains fierce, we anticipate strong home sales growth at a more sustainable pace than in 2021. Affordability will increasingly be a challenge, as interest rates and prices rise, but remote work may expand search areas and enable younger buyers to find their first homes sooner than they might have otherwise. And with more than 45 million millennials within the prime first-time buying ages of 26-35 heading into 2022, we expect the market to remain competitive."
According to the 2022 Housing Forecast, home sales will hit their highest level in 16 years (+6.6% year-over-year), as buyers remain active, and for-sale inventory continues to recover from the short supply found in the current market.
It is also predicted that buyers will face a competitive seller's market, with record-high listing prices, fast-paced sales, and limited for-sale home options, as existing-home listings continue to lag behind pre-COVID levels. The new construction supply gap of 5.2 million new homes may shrink somewhat in 2022, as home builders continue to recover their production with a projected increase of 5% year-over-year.
Of note, Realtor.com predicts some major highlights for the coming year:
- Millennials to fuel fierce first-time buying market through 2025: Millennial housing demand has been rising for years, but the pandemic ignited a first-time buying frenzy as the decade-long housing shortage converged with new opportunities for young buyers to pursue their first homes. Millennials have accounted for 53% of prospective buyers who plan to purchase their first home within the next year. And despite signs of a return to inventory growth, this demand is expected to outpace both new and existing-home inventory.
- Affordability issues will linger: Record-low rates helped buyers better manage monthly housing costs in 2021, as affordability will continue be an important consideration in 2022 as mortgage rates are anticipated to climb and home prices continue to rise. That being said, a number of factors will come into play and keep homeownership within reach for many, including expected income growth of 3.3% by year-end, combined with dwindling unemployment numbers.
- Remote work opportunities will expand options: From workplace flexibility to higher incomes, employees will enjoy deeper flexibility in 2022. Recent data finds that 19% of prospective sellers are looking to move because they no longer need to live near the office, up from just 6% in the spring.
- COVID continues to spur the demand for increased space: Demand for more space has been a consistent trend throughout the pandemic and is expected to continue that trend through 2022. Realtor.com has found that viewers of suburban home listings have risen 42.1% since the onset of COVID, and larger suburban spaces will continue to be targeted by buyers over urban metros.
- Homeowner diversity will factor in the housing market: As demographic diversity increases among younger generations, populations like Hispanic Americans will play a growing role in the 2022 housing market. Although they are underrepresented among homebuyers relative to their share of the population, the number of Hispanic shoppers is rising at a faster pace than non-Hispanics, driving demand and impacting the homeownership rate in 2022 and beyond.
"Our Housing Forecast suggests that we're in store for another dynamic year of activity, but 2022 will also come with growing pains as we navigate the path forward from the height of the pandemic toward a new normal," said George Ratiu, Manager of Economic Research for Realtor.com.