Two-year forecasts reveal more tough news for housing affordability


The usual array of housing market players including Fannie Mae, Goldman Sachs, Zillow and others have published growth predictions for 2022. After 2021’s unprecedented surge in housing prices, with an annual increase of nearly 20%, experts are predicting a growth rate of anywhere between 8% and 16% in 2022.

What does this mean for homeowners? It means they’ve seen the value of their homes skyrocket over a short period of time. Will home values continue to increase? Absolutely. They just won’t increase as quickly. In fact, it’s more sustainable for the annual growth rate in the housing market to be around 6%.

The forecasted growth rate depends on a number of factors, one of the most important being interest rates. Fannie Mae economists, who released a two-year rather than a one-year housing market forecast for the first time ever, predict that interest rates on 30-year mortgages will reach 3.4% by the end of 2022, then level off at 3.5% in 2023. Some economists see those rates getting higher.

Higher interest rates threaten affordability by decreasing buying power. If fewer people can afford to buy homes, fewer homes will be sold. In 2021, over 6 million existing homes were sold. Economists at Fannie Mae see that number falling to 5.6 million in 2022 and 5.5 million in 2023.

Fewer home sales don’t mean that the demand for homes isn’t there; it means that there aren’t enough existing homes for everyone who wants one and we can’t build them fast enough to close the demand gap. Dave Meyer, vice president of data and analytics at BiggerPockets, a real estate investing website, notes that we are between 4 and 5 million homes short of what we need. Despite the fact that Fannie Mae forecasters point to new home sales growing by 14% next year, Meyer says that we are 9 to 10 years from building enough homes to close the demand gap.

What does all of this mean for homebuyers? Mortgage interest rates may never again be as low as they are right now. To keep buying power as strong as possible, potential buyers shouldn’t be afraid to step into the ring. The frenzy of bidding wars that marked early 2021 has mostly subsided. Even though inventory still isn’t where we’d like it to be, buyers can enjoy the lower interest rates without the madness and heartbreak of multiple offer situations.  

Anyone interested in selling their home can take advantage of the robust growth in their home value. Whether you’re buying or selling, my team and I would love to help you take the next step. Give me a call at 360-508-2800 or send me an email at kwoodford@kw.com to start the conversation!

Kristy Woodford is CEO of Holistic Home Group, which is affiliated with Keller Williams South Sound. She has over ten years of experience as a broker of residential real estate in Thurston County and leads a team of realtors experienced in serving local buyers and sellers.


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