Over the past 18 months, the U.S housing market has seen skyrocketing prices. This is due to several factors, including a record low supply of homes for sale, high labor and building material costs, low mortgage rates, and COVID restrictions pushing families out of cities and into the suburbs.
“Everybody expected housing to really sort of dry up with the rest of the economy,” said National Association of Home Builders CEO Jerry Howard. “And in fact, the opposite has happened. People who have been sort of scared out of the cities by the pandemic.”
According to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, the housing market has seen a 19.9 percent year-over-year gain.
But with recent elevated inflation, the Federal Reserve is likely to raise interest rates sooner than anticipated. That means the current 30-year fixed mortgage rate of 3.05 percent would increase.
So what does that mean for 2022?
Reports from Realtor.com, Zillow, and Goldman Sachs have delivered mixed results — leaving home buyers pessimistic about the year ahead.
Zillow’s recently released September 2021-September 2022 Home Value & Sales Forecast expects home values to grow 13.6 percent year-over-year. However, Zillow admits higher mortgage rates, expiration of mortgage forbearance, and inflation add some uncertainty to how the next 12 months will play out.
Similarly, Goldman Sachs believes the U.S. will see an additional 16 percent increase in home values by the end of 2022, stating there is still a “supply and demand mismatch in the favor of sellers.”
In short, just like much else over the past year and a half, we cannot predict the future. Homebuyers should continue to monitor the market and take advantage of low interest rates while they last.