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Tuesday, November 16, 2021
NAR Economist Yun: Housing Market May Normalize in 2022
By Kerry Smith
Forecasts always include caveats that may upend predictions, but NAR’s Lawrence Yun says the market is hot right now – and he sees more of the same in 2022. While next year’s sales may not surpass 2021 numbers, he expects a banner year compared to those before the pandemic.
SAN DIEGO – The outlook for the residential real estate market, which performed exceptionally well during the height of the pandemic, continues to be promising, according to NAR Chief Economist Lawrence Yun, speaking during the National Association of Realtors® (NAR) convention.
“All markets are seeing strong conditions and home sales are the best they have been in 15 years, Yun said. “The housing sector’s success will continue – but I don’t expect next year’s performance to exceed this year’s.”
An unknown, he said, is how remote work opportunities will play out in the future, and he advised the industry to keep that in mind.
“We are only in the first innings of work-from-home options,” Yun said. “People have not fully digested the work-from-home-flexibility model yet in determining home size and locational choice.”
Even though there may be a decline in sales in 2022, Yun still forecasts that home sales will outdo pre-pandemic levels. His prediction, he noted, is based on an anticipation of more inventory in the coming months. That supply will be generated, in part, from new housing construction – already underway – as well as from the conclusion of the mortgage forbearance program, which in turn will cause a number of homeowners to sell.
“With more housing inventory to hit the market, the intense multiple offers will start to ease,” Yun said. “Home prices will continue to rise but at a slower pace.”
The job market struggled during the pandemic but turned a corner and continues to make incremental progress, Yun said. Since the nation emerged from lockdown, 18 million jobs have been created. At 4.6%, the unemployment rate implies the U.S. economy should be back to normal – however, the country still faces an employment shortage, he added. There are 4 million fewer jobs now than the number before COVID-19.
Forecasts for 2022 depends a bit on U.S. location. Some areas of the nation are thriving and fully recovered, Yun said – places like Idaho and Utah. Both states currently having more jobs now than at the beginning of the pandemic.
While real estate has thrived, Yun says signs suggest that a more normal and predictable market is on the horizon. Home sales surged over the past year in an uncharacteristic manner, with many receiving multiple bids after only being on the market for a short period. However, the 2022 housing sector will settle down, though at above pre-pandemic levels.
Yun projected that mortgage rates, currently at 3.0%, will increase to 3.7% in the coming months, a rise he attributes to persistent high inflation. Home prices rose by 12% on average in 2020 and 2021, while inflation rose 3%.
“Rising rents will continue to place upward pressures on inflation,” he said. “Nevertheless, real estate is a great hedge against inflation.”