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Housing prices to slow in 2022: Report

Housing prices to slow in 2022: Report
by Brad Cartier, posted in Newsletter

Housing prices aren’t slowing down, but according to a new report 2022 may see a flattening of the housing market. Jessica Dickler of CNBC opened up the week reporting that household income and home prices have been out of sync for generations. According to various sources:

  • Over the last 10 years, median home prices rose 30%, which incomes increased just 11%.
  • Since 1965, accounting for inflation, home prices increased 118%, while incomes have increased by 15%.

Household income versus home prices - CNBC

Source: CNBC (Nov 2021)

Nicole Friedman of The Wall Street Journal (subscription required) reported on National Association of Realtors (NAR) data showing that the resale price of single-family homes nationwide increased 16% in Q3 2021 alone. The average price now sits at $363,700.

“Fast-rising prices are outweighing the benefit of low borrowing rates and making it more difficult for buyers to enter the market. In the third quarter, the typical monthly mortgage payment for a single-family home rose to $1,214, from $1,058 a year earlier, NAR said, even as mortgage rates declined.”

There may be some reprieve on the horizon, not just from rising interest rates. Lance Lambert of Fortune reports on a forecast from the Mortgage Bankers Association (MBA), which stated that they expect the median price of existing homes to increase 15.3% year-over-year in Q1 2022, but “it sees prices beginning to fall as the year progresses. The group expects the median price of existing homes to end 2022 at $352,000. That would represent a 2.5% year-over-year drop in home prices.”

MBA housing price forecast for 2022

Source: Fortune (Nov 2021)

According to Bill McBride of CalculatedRisk, inventory of housing will be the deciding factor in home price growth over the coming years. “In 2019, when several commentators were bearish on housing, I pointed out there was no sharp increase in housing inventory (like in 2005), and that was one of the reasons I remained optimistic on housing and the economy (correctly!)…[Currently] my Spidey senses are tingling, however it isn’t obvious why this time – or what the outcome will be…But I believe one thing is certain: inventory will tell the tale!”

More on Zillow

Last week we discussed Zillow’s woes in the iBuying market. A few updates this past week are worth mentioning. Ben Carlson of A Wealth Of Common Sense reports on some high-level takeaways from Zillow’s iBuying mistakes:

  • Real estate is local: “Value in the housing market is determined by a wide range of factors from location to neighborhoods to taxes to school systems to amenities and much more.”
  • Predicting housing prices is difficult: “The problem with using historical models and algorithms when making buy and sell decisions in something as large and complex as the housing market is that it’s impossible to account for unknown variables.”
  • Long-term usually wins: “Zillow wasn’t trying to hold houses for the long term. They were trying to buy and flip them in the short term.”

The heavy reliance on technology and algorithms to purchase homes is a cautionary tale for other iBuyers, including Offerpad and Opendoor. That said, in their latest earnings reports, both reported record earnings. For more on lessons learned, check out Matthew Blake’s Housing Wire article titled, A Zillow problem…or an iBuying problem?

Will Parker of The Wall Street Journal (subscription required) reports that Zillow was able to offload 2,000 of the 7,000 homes left in its portfolio to Pretium Partners. The NYC-based investment firm plans to rent out all of these homes. No surprise here, with rents sitting at record highs.


According to Michael Rudy of Yield Pro, the national average apartment rent jumped $23 in October, to a total of $1,572/month. This is up 13.7% year-over-year, and occupancy levels sat at 96.1% for apartments, the highest Yardi Matrix has ever recorded. Single-family home rents also rose 14.7% year-over-year.

According to the above data, the slowest year-over-year rent increases were seen in Twin Cities (4.8%) and San Francisco (5.6%), with the highest being in Phoenix (26.3%) and Tampa (25.8%). Further, a new report from HouseCanary had similar findings:

“Across the country, the number of available properties has plummeted since the start of the pandemic in March 2020, with areas of Louisiana experiencing the biggest drop in supply. As the demand for properties in Florida and California has risen, cities in those two states have also seen a significant downward shift in inventory levels. Over the next few months, we expect supply to start rising to normal levels, which should stabilize prices – although it’s unlikely that prices will drop significantly anytime soon, unwelcome yet unsurprising news for anyone following the housing market this year.”

And, just like Pretium Partners who purchased 2,000 Zillow homes, institutional investors continue to see single-family rentals as a top-performing asset class. According to Will Parker of The Wall Street Journal (subscription required), “The expected risk-adjusted annual return for built-to-rent investments in the private market is now about 8% on average, according to securities advisory Green Street, the highest of 18 property sectors tracked by the firm.”

And the demand for single-family rentals is only getting stronger. Marketplace quotes Frank Nothaft, chief economist at CoreLogic, saying that “And the rent growth we are seeing now is just much sharper than anything we’ve recorded previously…We’ve seen a lot of families move out of high-rise apartment buildings, looking for single-family homes or looking for homes in low population density communities.”

Couple this with a recent Politico article titled, Biden’s next inflation threat: The rent is too damn high, for more on how rents, inflation, and politics will intersect in the coming year.

To get the latest market rent report, with comparables, check out Stessa’s rent estimate tool.

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