Experts Divided on Whether Home Sales Will Rise or Fall in 2022

A panel of economists and housing experts is evenly split on whether sales will rise or fall in 2022 as concerns over worsening affordability collide with expectations for rising inventory.

When asked, 41% of participants in the latest Zillow Home Price Expectations survey (ZHPES) said sales will grow, 41% predict a slowdown, and 18% believe sales will remain roughly the same.

There were about 6.32 million homes sold from January through November of 2021, the most sales in that time period since 2006. Of those, roughly 5.61 million were existing homes. Zillow’s own forecast calls for sales of existing homes to increase a bit in 2022, drawing on recent sales performance, household formation rates and the expectation that mortgage rates will remain relatively low, offering attractive financing for home buyers. 

“In America’s frenzied pandemic-era housing market, buyers and sellers have both defied expectations: Buyers have forged on in the face of record-fast price appreciation, and homeowners have steadfastly demurred from cashing in on this selling opportunity,” Jeff Tucker, senior economist at Zillow, said in prepared remarks.

“The outlook for home sales in 2022 hinges on which side yields first. If buyers finally balk at unaffordable prices, sales volumes could fall. But if homeowners finally start listing their homes en masse, we could see a sales bonanza, cooling the pace of appreciation. Our expert survey panel was split right down the middle on which scenario to expect.”

Panelists who foresee lower sales in 2022 point to financial strains on buyers as the main driving factors. Worsening home affordability was cited by 54% of respondents as the most important reason for a sales decline, while higher mortgage rates were noted by 28%. As home values skyrocketed in 2021—up a record 19.3% year over year in November—affordability saw its greatest decline since at least 2014.

“Affordability is fast becoming the main issue in housing markets today as prices have risen at the fastest pace on record,” Calvin Schnure, senior vice president, research & analysis at Nareit, tells GlobeSt.com. “Of course, affordability is linked to inventory, and it is the shortfall in home construction over many years preceding the pandemic that set the conditions for today’s tight markets. 

“New construction will take a long time to become available, suggesting the challenges from affordability may worsen before they improve.”

Taking a Pulse in Select Markets

Lack of inventory was cited by Compass agents as the most influential factor heading into the 2022 real estate market. While more than half (56.4%) of Compass agents noted that the lack of housing supply will drive the 2022 market, 46.4% were optimistic that inventory will increase slightly in the coming year.

“The greatest factor I see affecting the 2022 housing market is the low inventory,” Orange County, Calif.-based Compass agent Paulo Prietto tells GlobeSt.com. “While inventory remains low, buyers will become more accustomed to the lack of choices and will continue to aggressively compete to purchase homes.”

For Southern California in particular, Compass agents were a bit more conservative, with 43% of local agents expecting a slight increase of inventory throughout the region. Similarly, nearly 43% of Chicago area Compass agents also indicated a modest increase in housing inventory for the region.

“A lot of people who rented last year will buy this year,” Kat Barry a Chicago-based Compass agent Kat Barry tells GlobeSt.com, “and a few more homes will be on the market with COVID easing a bit, but there isn’t going to be the large influx of inventory we truly need to make this a balanced market.”

Compass Forecasts a Seller’s Market

More than three-quarters (76%) of Compass agents predict that 2022 will be another seller’s market, with 18.1% of agents within that pool forecasting a “strong seller’s market.”

In Southern California, this sentiment was even stronger, with 90% of Compass agents expecting a favorable seller’s market, and nearly 37% of those responders indicating a “strong seller’s market.”

Compass agents consistently indicated that they expect national housing prices to increase in 2022, with 65.4% forecasting an increase in sale prices and 76.6% citing an increase in rent prices.

“The continuation of limited inventory, with strong consumers driving up prices, first-time home buyers will continue to struggle with purchasing, causing more demand for rentals,” Southern Florida-based Compass agent James Smith tells GlobeSt.com.