We all wish we could look into the future and know exactly what the future holds for us. Well, we all know that’s impossible, but thanks to some very clever forecasting, we can get a pretty good glimpse into real estate in 2022 from a local and national standpoint.
Last week, Lawrence Yun, the National Association of Realtors’® (NAR) chief economist and senior vice president of research, unveiled the consensus forecast during NAR’s third annual year-end Real Estate Forecast Summit, which focuses on the national landscape. Dr. Yun, who has presented for Greater Chattanooga REALTORS® multiple times, says to expect slower housing price appreciation, easing inflation, and rising interest rates in 2022.
This forecast isn’t just from Dr. Yun but rather the consensus of more than 20 top U.S. economic and housing experts. As for 2022, the group of experts predicted that annual median home prices will increase by 5.7%, inflation will rise 4%, and the Federal Open Market Committee will twice increase the federal funds rate by 0.25%.
“Overall, survey participants believe we’ll see the housing market and broader economy normalize next year,” Yun said. “Though forecasted to rise 4%, inflation will decelerate after hefty gains in 2021, while home price increases are also expected to ease with an annual appreciation of less than 6%. Slowing price growth will partly be the consequence of interest rate hikes by the Federal Reserve.”
Yun forecasts U.S. GDP to grow at the typical historical pace of 2.5%, barring any major, widespread transmission of the omicron COVID-19 variant. He expects the 30-year fixed mortgage rate to increase to 3.5% as the Fed raises interest rates to control inflation but lower than the pre-pandemic rate of 4%.
The housing market performed better than it has in 15 years in 2021, with an estimated 6 million existing-home sales. However, as mortgage rates tick up slightly, Yun predicts existing-home sales will decline to 5.9 million in 2022. He also forecasts a modest increase in housing starts to 1.67 million as the pandemic’s supply chain backlogs subside.
So, where does the forecast leave us locally? For the Chattanooga-area market in 2022, experts are projecting 3.7% home sales growth (year over year, and 6.9% home price growth (year over year).
These numbers are helpful, but what can we take away from them? Simply put, it means that the market is looking to remain robust and fast but slowing down somewhat from the breakneck speed of the past year and a half. These predictions means that it will still be crucial to work with a Realtor who can maximize your chances of getting a jump on those properties that tend to sell quickly. Realtors work for their clients every day - That’s Who We R.