The ever-quotable baseball legend Yogi Berra famously said, “It’s tough to make predictions… especially about the future.”*
Well, in this issue of our newsletter, we’re going to try anyway! At least we’ll let you know what some of the major forecasters are saying about the 2022 real estate market. After two years of strong home price appreciation, buyers certainly want a break! But yeah, sellers, we know you’re quite happy with the situation! OK, so let’s get right into several forecasts:
Note: this article was featured in our December 2021 email newsletter.
Realtor.com predicts that supply will increase as more sellers list properties, and nationwide, sales will hit a 16-year high. But with 45 million millennials in their prime first-time buying years, and with unemployment falling, buyer demand will continue to outpace the supply. This will continue to drive prices up. Nationally, they predict median prices to rise 2.9%, but here in the Sacramento region, they expect nearly double that, with price increases of 5% for the year. Still, that would be an easing from the 14% yearly growth they showed at this summer’s peak.
Zillow also predicts the most sales since 2006, with rising supply next year. However, buyer demand will continue to outstrip supply, and they expect more bidding wars through the spring and summer peak homebuying season. Their price growth forecast is much higher than Realtor.com, expecting the national average home price to grow 11% in 2022, compared to their estimate of 19% this year. In the Sacramento region, Zillow’s more detailed dataset shows expected price appreciation of nearly 15%.
Redfin’s forecast is the most buyer-friendly, saying rising mortgage rates will reduce annual price growth to around 3% and that this cooling of the market will discourage speculating investors and give buyers a little less competition. But those rising mortgage rates will also start to pinch affordability, and many buyers are expected to lock in a purchase early in the year to try to beat the rate increases. And they warn that it still won’t be a buyers’ market – just a little more sane than the past two years.
UCLA’s Anderson Business School released its forecast this week, which isn’t specific about home prices but provided some interesting context. They note that last year a net of 250,000 people left California for other states. An important driver of that outflow is unaffordable home prices. But they counter that the popular markets for ex-Californians (think Austin, Phoenix, Las Vegas, Seattle, Boise, and Nashville) are getting more expensive, and as their prices rise, this outmigration will slow to nearly zero by 2023.
The bottom line: No one has a crystal ball (or at least one that really works!), so understand that all forecasts will be off in some amount. But the consensus looks like we should expect more home price appreciation in the coming year. Rising interest rates will reduce homebuyer demand a bit, but demand will still be strong and will exceed supply of available homes. Expect prices to continue rising, but probably slower than this year. Maybe we’ll see fewer bidding wars, too. That would reduce the stress of this process quite a bit!
If you’re a buyer, think about getting a jump on the market by shopping early in the year, especially if you can get in before interest rates go up.
If you’re a seller, the market is still in your favor, but if you’re thinking of making a move in the next few years, this might be your best time, too. You might want to strike while the iron is hot and sell into this strong market and also take advantage of great rates if you need a mortgage on your next home.
If you have any questions, we’re always happy to talk. Shoot us an email or give us a call — our contact info is below.
*There is some dispute about the origin of this quote, but everybody loves some Yogi Berra wisdom, right? 😉