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At the outset of 2022, a group of forecasters at Realtor.com laid out their expectations for the year to come.
Now, they’re taking a second look.
The listing portal’s economists revisited their 2022 housing forecast this week, updating their predictions for the year in light of a market that has moved in a number of unexpected directions.
Here are the four housing data trends from the first half of the year that amounted to the biggest surprises.
1. Mortgage rates snap back — and fast
Perhaps the biggest story of the year so far, mortgage rates have recovered from their all-time lows, faster than almost any major public forecast predicted.
In its initial 2022 forecast, the team at Realtor.com thought mortgage rates would spend the year significantly higher than last year’s historic lows — ending the year somewhere around 3.6 percent.
By February, rates had already blown well past that point.
Now in June, the updated forecast sees rates settling somewhere around 5.5 percent by the end of 2022. That’s roughly the level they’ve been at in recent weeks.
For many buyers, this might not be enough to blunt their interest in the near future.
“While higher costs have dampened homebuyer demand, knocking some households out of the hunt for a home entirely, consumers expect mortgage rates to continue to climb,” the report reads. “This means that homeshoppers who continue to search, will feel a strong sense of urgency to act quickly in the hopes that they may secure a lower rate.”
The team’s economists were hardly alone in failing to predict just how quickly mortgage rates would rise.
Even as recently as March, the Mortgage Bankers Association forecasted rates would end the year around 4.5 percent and remain in that range through 2024.
The rise in mortgage rates coincides with increasingly aggressive measures by the Federal Reserve to combat inflation, which has ramped up faster and stuck around longer than most expected.
It’s also intricately linked with some of the other biggest surprises in the opening months of 2022.
2. Existing home sales fall
After spending the first year-and-a-half of the pandemic in a red-hot state, the home market was expected to cool down.
But not every expert agreed on what exactly that cooldown might look like.
At the start of the year, Realtor.com projected even more homes would sell in 2022 than did in 2021. Price growth, the team thought, would be the area that slowed the most.
But instead of a predicted 6.6 percent increase in existing home sales, the team has now adjusted their forecast downward to a 6.7 percent decline.
“We expect to see the biggest year-over-year weakness in home sales in what’s traditionally the heart of the summer selling season,” the report reads. “As we move into cooler months and both buyers and sellers have an opportunity to recalibrate their expectations of the housing market, we expect to see somewhat greater transaction activity, but sales will still lag year-ago pace.”
Redfin, which announced Tuesday it was laying off 8 percent of its employees, pointed to the general decline in demand for homes as one of the key reasons why. Compass on the same day announced it was laying off 10 percent of its full-time employees.
This decline in home transactions doesn’t mean the market is bereft of activity, though. If the latest projection holds, 2022 would see the second-highest number of homes sold since 2007, the report reads.
Still, a drop in transactions can mean fewer opportunities for agents to make commission, and this decline happened earlier than some experts anticipated.
3. The inventory recovery begins early
The nation’s supply of active home listings — already low before the pandemic began — quickly eroded further throughout the pandemic.
But for the first time, May saw a year-over-year increase in the number of active listings available to buyers at a given time.
Inventory is back on the rise.
The turnaround is only in its infancy, and inventory remains near historic lows for this time of year. But it’s been enough for Realtor.com to adjust its year-over-year growth forecast from 0.3 percent to 15 percent.
“As more homeowners look to make adjustments to fit changing personal needs and take advantage of favorable market conditions to access the significant amount of equity they have likely accumulated, home shoppers will have more choices,” the report reads.
Still, the inventory environment is expected to continue to heavily favor sellers for the foreseeable future.
4. Price growth is resilient
With mortgage rates rising faster than nearly anyone expected and the number of transactions in decline, one might have thought prices would grow slower than expected, or even reverse course altogether.
That’s yet another area in which the market has defied expectations.
The forecasters at Realtor.com had initially thought the frenetic pace of home price growth from 2021 would slow to 2.9 percent this year as the market cooled. But prices have proved unexpectedly resilient.
The forecast has been adjusted to predict a 6.6 percent rise in home prices during 2022. That’s still a slowdown, but not as steep as before.
And that cooldown in prices is expected to continue, perhaps just not as fast as once thought.
“In 2022 we witnessed the early year housing frenzy give way to tough budget realities as rates hit decade-plus highs and home prices continued to surge, causing some buyers to postpone homebuying plans in the face of higher costs,” the report reads.