Realtor.com Housing Market Predictions Sees Falling Real Estate Prices

With economic conditions and the expectations of buyers and sellers changing seemingly every day, it’s a tough time to forecast the direction of the US housing market.

Real estate listings website, Realtor.com has now updated its 2022 housing forecast to reflect these changes, predicting the market will stabilize while demand cools and supply grows.

Let’s take a more detailed look at the forecast and what it means for US housing market predictions and prospective homebuyers and sellers.

What Does the Forecast Predict Will Change?

One of the most significant changes to note is the increase in mortgage rates, which ended up higher than many expected in 2022, thanks to the roaring inflation and the monetary policy response we’ve seen this year.

At the start of 2022, few would have foreseen that inflation and living costs would rise to the extent they had — never mind some of the geopolitical events that have exacerbated these trends.

Realtor.com now expects mortgage rates to reach 5.5% by the end of the year, compared to an initial 3.6%. However, the bulk of this increase has already taken place.

Due to the higher lending cost and general uncertainty, buyers are now more likely to hold off on purchasing properties, meaning there’s been a decline in home sales compared to 2021. Two other US housing market reports, one from CoreLogic and the other from Zillow, predicted something similar.

Seperately, Zillow also reported a very high number of buyers experiencing regret for their housing market purchases during the pandemic. While buyers remorse can hardly be taken as a sign of housing market crash, there can be little doubt pandemic buyers will experience extra pain from falling prices.

Realtor.com expects a decrease of 6.7% in sales this year, which is a massive change from its previous prediction (an increase of 6.6%).

Meanwhile, the site expects more homes to be listed for sale and inventory to rise higher than originally thought. Therefore, it has revised its forecast from an increase of 0.3% to a rise of 15%.

The previous forecast expected home price growth to cool down, but this hasn’t happened as quickly as Realtor.com expected. While the forecast of painful

It has therefore revised its estimations upward, expecting price growth of 6.6% over the year.

What’s Staying the Same?

Not all metrics included in the forecast have experienced massive shake-ups — some have broadly remained as they were before.

Most notably, homeownership predictions increased slightly from 65.6% to 65.8% — an increase of just 0.2%.

Plus, the number of single-family home housing starts (which tracks the construction of new homes) remains the same as before: An increase of 5%.

What it Means

It’s tempting to see predictions for slowing house price growth and assume it means we’re entering a bear market, but the truth is far from this.

If the projections outlined above are accurate, it would still mean that 2022 is the year featuring the second-most home sales since 2007 (with 2021 taking the number-one spot).

As a result, we’ll most likely remain in a seller’s market, meaning sellers have greater sway in dictating prices than buyers.

However, if housing supply continues to increase at current rates while demand slows and mortgages become more expensive, this will most likely change eventually — just not in 2022.

Overall, it’s not a great time to be a buyer right now, and this report suggests things will remain that way for a while.

Buyers must contend with higher rates and rising prices, meaning they’ll have to either increase their down payments or find more affordable homes.

Fortunately, since unemployment is low and wages are growing, conditions may sound good in theory for helping buyers to get on the ladder — but inflation is making this difficult, with salaries failing to rise as quickly as other costs.

One advantage buyers have is that, with variations between housing markets in different parts of the country and the widespread nature of remote working, people now have an opportunity to secure affordable housing by looking further afield.

That’s probably why the Realtor.com report also shows that 40.5% of prospective homebuyers considered homes outside their states.

Yet while this is an option, it spells some serious questions about affordability. Is it sustainable to expect people to move away from their preferred location to purchase the house they want?

Most buyers will probably be best off waiting for prices to fall over the summer, especially since the season tends to be popular for house shopping.

Market conditions may be more favorable by autumn — but it will take even longer for a complete stabilization to occur.

Final Word: US Housing Market Predictions

Sales are Declining, but the Market Still Runs Wild

The housing market has been so strong that even the best analysts couldn’t have predicted the bubble to continue during 2022.

While there are some signs of prices deflating, it isn’t easy to make any solid predictions for more than a few months ahead, so more revised reports may be to come.

But if one thing is for sure, it’s not a great time to be a buyer right now.

What Does the Forecast Predict Will Change?

What’s Staying the Same?

What it Means

Final Word: US Housing Market Predictions

Sales are Declining, but the Market Still Runs Wild

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