Home prices are rising at record rates, a trend that is expected to continue in 2022, according to this economist. (iStock)
After a year of record-pace home price surges, appreciation is expected to continue into 2022 and remain high, according to First American Deputy Chief Economist Odeta Kushi’s forecast.
"This supply-demand imbalance generated the record house price appreciation seen in 2021 and, given this dynamic shows few signs of changing, we expect house price appreciation to remain high in 2022," Kushi said.
According to Kushi, American homeowners averaged a historically high $280,000 in equity in Q2 2021. She added that those gains will continue to benefit the 65% of Americans who are homeowners.
"Increasing house price appreciation may encourage existing homeowners to use that equity to purchase a larger and more attractive home – a dynamic known as the wealth effect of rising equity, which is already happening to some extent," she said.
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The pace of home price growth heading into 2022
The latest existing home sales report from the National Association of Realtors indicated that the sales of homes priced at more than $1 million rose by 31%. It also found that home with sales prices between $750,000 and $1 million grew by 25%. But even as prices increase at historic rates, supply shortages and affordability concerns could cause a price growth slowdown in 2022.
"Although we’re likely to remain in a competitive sellers’ market through next year, it’s possible that the affordability crunch and ongoing supply shortage may ease the full-throttle demand we’ve seen in 2021 and result in a moderation of house price growth," Kushi said.
Homeowners can benefit by refinancing their mortgage while interest rates are at record lows. Currently, the 30-year fixed-rate mortgage rests at just above 3%, according to the latest data from Freddie Mac. You can get started with the mortgage application process on Credible and compare multiple lenders at once to choose the one with the best interest rates for you.
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How are first-time homebuyers faring amid price increases?
Although current homeowners may benefit significantly from this year’s home price gains, first-time buyers could struggle to enter the market.
"First-time homebuyers don’t have the equity from the sale of an existing home to bring to the closing table," Kushi said. "While the fundamentals support continued first-time homebuyer demand in 2022, these buyers will face an uphill battle if housing supply remains near historic lows. You can’t buy what’s not for sale."
If you are interested in buying a new home or in a cash-out refinance on your current loan, contact Credible to speak to a home loan expert and get all of your questions answered.
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