Existing home sales in the U.S. are expected to drop 6.7% by the end of this year, compared to 2021, according to Realtor.com’s 2022 Housing Forecast released Monday.
That’s a major shift from earlier in the year, when the property website predicted a 6.6% rise in existing home sales. But with the increase in borrowing costs and economic uncertainty looming, people are not in the same rush to move as they have been for the last two years.
“Financial conditions have shifted in a big way since the end of 2021 and the housing market is adjusting accordingly,” Danielle Hale, the chief economist of Realtor.com, said in the report. “As Americans grapple with higher prices for everyday expenses while today’s buyers face housing costs that are up 50% from a year ago, recent home sales data shows some are taking a step back from the market.”
In addition, inventory is forecast to improve by 15%, up from the 0.3% predicted earlier this year. That could mean a better market for buyers in the fall.
“Our updated 2022 forecast anticipates that demand will continue decelerating through the summer, providing breathing room for the inventory recovery to accelerate,” Ms. Hale continued. “As a result, this fall could be an opportune time to find a home. Still, preparation will be key throughout 2022, as it continues to be a seller’s market and asking prices remain high.”
Indeed, prices are likely to remain elevated, with Realtor.com expecting them to rise 6.6% over 2022, up from their previous prediction of 2.9%.
Meanwhile, homebuyer budgets have remained essentially flat, rising just 0.3% annually in the three months ending April 30, according to a separate report Monday from Redfin. That’s the slowest growth rate since June 2020, and it could mean a turnaround for house prices.
“Budgets haven’t fallen from a year ago and we don’t expect home-sale prices to fall, either,” Redfin deputy chief economist Taylor Marr said in the report. “But the fact that budget growth has slowed so significantly is one sign among many that home-price growth will continue to slow as the year goes on.”
Mansion Global is owned by Dow Jones. Both Dow Jones and Realtor.com are owned by News Corp.