Will Home Prices and Rents Finally Fall? Our Bold Predictions on Real Estate in 2022
By Clare Trapasso
Dec 1, 2021
1 of a 3 part series
- Prices will stay high, inventory will remain tight, and mortgage rates will rise
- Prices aren’t anticipated to come down from the highs
- “The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes”
Here’s what we already know: Since the COVID-19 pandemic began, the real estate market has been on a wild ride of unprecedented highs and lows—record-high home prices on one side, record-low mortgage rates and available homes for sale on the other. It’s been a time of overwhelming stress for many, gigantic profits for some, and great disorientation for most of us.
Now the housing experts say the market is “normalizing.” But what does that mean? Will home prices and rents finally come down? Will more homes go up for sale? And what does the year ahead have in store for the real estate market?
The Realtor.com® 2022 housing forecast anticipates the market will continue slowing down from the frenzy seen in the spring when prices shot up to new heights. However, prices will stay high, inventory will remain tight, and mortgage rates will rise.
The bottom line: Even as the market calms down further, it’s still expected to be challenging for buyers, especially those purchasing their first homes.
“The 2022 housing market will continue to be a seller’s market with fast-moving homes and rising prices,” says Realtor.com Chief Economist Danielle Hale. “But the competition should be a bit less intense than we’ve seen recently.”
Home prices will stay high, but price growth will continue slowing
Home prices aren’t expected to keep zooming up into the stratosphere in 2022 the way they did this year. So buyers can breathe at least a shallow sigh of relief. Instead, Realtor.com economists anticipate they’ll increase at a much slower rate of just 2.9% over this year compared with an anticipated 12% rise in 2021.
This means the double-digit price growth that confounded buyers earlier this year is expected to taper off.
However, prices aren’t anticipated to come down from the highs they reached this year due to the continuing shortage of properties for sale and hordes of buyers continuing to enter the market. They just won’t go up so much as quickly.
“Price growth is expected to move back toward a normal range, but this is on top of recent high prices,” says Hale. “So prices will [still] hit new highs.”
While that’s not great news for buyers, homes aren’t expected to cost much more than they did just a few months ago.
“The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes,” says Hale. “With prices high and mortgage rates beginning to tick up, people won’t be able to be as aggressive in what they’re willing to pay.”