Where Will Housing Go In 2022?

By Douglas Katz – 06/23/2022

First let me get this out of the way.  I recommend strongly that you delete, throw away and disregard any forecasts more than 30 days old.  Too much has changed in the markets and, more importantly, in the sentiment of real estate and mortgage professionals, buyers and sellers.  Rates have spiked by points, not basis points or fractions of a percent as would normally be expected in this amount of time, but by actual percentage points.  Inflation is still high.  There are some layoffs beginning in certain sectors like lending and real estate, but this will likely spread to those industries that support real estate and lending.  I would actually expect that the layoff contagion will spread to other sectors as well as markets correct.

Now that the overall market is more clear, how will this impact housing.  Well, CoreLogic just released a new report and update to their forecasts for the what to expect and it has some great information if you are considering buying or selling a home.

Here are some of the key highlights:

  • Home price growth will slow.  Year over year, CoreLogic expects to drop to single digits, specifically 5.6%.  We are currently, based on their data, seeing a 20.9% growth rate.  This is a significant change and while it will not occur overnight, nobody knows how fast it will occur.  So, if you agree with the trend that CoreLogic is predicting and that we could see an average double digit decline, it makes sense to begin planning for the new reality.
Source: CoreLogic
Source: Case-Schiller Index Forecast data provided by Moody’s Analytics
  • According to CoreLogic, we have seen 123 months of gains in home values and a staggering 70% sold for over asking price.  This is by any measure unsustainable.  A major component of the new headwind to home values is the the rapid increase in mortgage rates which have spiked by ~3% over the last few months.
  • Real estate is local.  This is something that you hear again and again if you follow the real estate and mortgage lending markets.  This means that some areas will get hit harder that other.  Based on CoreLogic’s deep dive, many of the hotter markets will continue to see steady growth for now.  Year-over-year, many are still squarely in strong double digit growth, BUT this is where we are today.  Their further analysis shows that many of those high flying markets could be facing the highest risk of declines.  The Midwest which saw slower growth will likely see less risk of major declines, but many are seeing population declines and they also saw lower gains for the last few years.
Source: CoreLogic
Source: CoreLogic
Source: CoreLogic

None of this is anything earth shatteringly new, but this is one of the better reports that I have seen.  I always like to see the viewpoint of an organization who does not have a dog in the fight.  You can look back over, in my opinion, overly optimistic market coverage from sources that have a benefit for optimistic evaluation of the data.  Remember there are lies. damn lies and statistics.  The latter is how we all make decisions on from when to buy or sell to when to lock a loan.  If you are looking at a transaction, know the signs are pointing to lower home prices and continued higher rates that we have become accustomed to.  Be smart and make sure you have a good idea of where things are headed as the market changes and even more importantly, pick good service providers.  Many industry veterans like me have seen several decades and multiple cycles.  We have navigated these waters before.  A 20-something at a call center may be able to get you a rate, but with this much volatility, they may be ill-equipped to guide you through the bumpy water ahead.