Will house prices drop from 2022 records?
Will home values come back to earth in 2022?
Home prices have climbed to all-time highs in 2021.
Property values have grown in double digits every year almost every month, creating “one of the strongest sellers’ markets in a generation,” according to Frank Martell, president and CEO of CoreLogic.
However, this year should provide some breathing space for those looking to buy their first home.
The rate of price growth is expected to dissipate through 2022 and even return to pre-pandemic normal by late summer.
Home prices will continue to appreciate, but by the fall, the pace could drop to a fraction of what it was at the end of 2021.
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Sunnier forecasts for first-time buyers
Intense demand and bidding wars have led to the astronomical growth in house prices that defined 2021.
The real estate market is still supercharged, but consumers should find a little more room in 2022 behind a pace of appreciation that is setting in.
CoreLogic’s latest Home Price Index (HPI) report showed an 18.1% annual jump in November 2021 – the highest on record since the company’s research began in 1976 – and predicts a average growth of 14.9% for the year (data for December not yet entered).
By comparison, the previous five years have never exceeded an average of 6%:
- 2016: 5.4%
- 2017: 5.8%
- 2018: 5.7%
- 2019: 3.9%
- 2020: 5.9%
The forecast for 2022 is much closer to the pre-Covid era and nearly halves 2021, falling to an average of 7.9%.
Price appreciation could drop to 2%
The HPI projection gradually decreases throughout the year and drops to 2.8% in November.
CoreLogic highlights two main factors that will drive home prices down: affordability issues and supply gains.
“The slowdown represents a moderation in buyer demand reflecting the erosion of affordability due to high prices and our forecast of rising mortgage rates,” said Frank Nothaft, chief economist at CoreLogic.
“And more inventory to sell from single-family buildings and more existing owners moving out,” he adds.
Are you looking to buy a house? Check your eligibility here (January 12, 2022)
Demand from buyers is already slowing
Recent buyer demand has already started to moderate.
With rising interest rates and the seasonal slowdown, December buying mortgage rate freezes fell 25.2% from September and 22.5% from November, according to Black Knight’s Originations Market Monitor.
Additionally, the Fannie Mae Home Buyers Sentiment Index declined in December as more consumers felt constrained by lack of affordability as housing supplies hit record highs.
While “affordability is likely to be a growing challenge,” Fannie Mae SVP and Chief Economist Doug Duncan expect “an increase in the number of new homes coming onto the market later in 2022”.
Example of house price growth
Home buying is expected to have another solid year in 2022, so it’s important not to confuse a slowdown in the appreciation rate with a total reversal.
Prices will not go down this year, but the amount they are going up should.
If we follow CoreLogic’s numbers, it gives a clearer picture of where the price of a $ 300,000 home is going and where it is expected to reach by November:
- House price in November 2020: $ 300,000
- Home price in November 2021 with an annual HPI of 18.1%: $ 354,258
- Home price in November 2022 with an annual HPI of 2.8%: $ 364,317
- Price change from 2020 to 2021: $ 54,258
- Price change from 2021 to 2022: $ 10,059
As you can see, this example home is still rising in value in 2022, just at an amount that is much more acceptable to buyers.
What are the mortgage rates today?
Of course, there is “never a bad time to buy” as long as you can afford it, according to The Mortgage Reports and MLO Licensed Loan Expert. Jon meyer.
While the pace of home price growth is expected to slow through 2022, interest rates are expected to do the opposite.
Checking your mortgage eligibility and contacting a lender could help you determine if buying a home is right for you and what you can afford.
Check your new rate (January 12, 2022)