WILL HOME PRICES RISE OR FALL?

Call it ‘hot home-price summer,’ as inflation, high housing demand and low supply continue to send costs skyward. Economists at Realtor.com recently revised their forecast for median sales price appreciation on existing homes to 6.6% in 2022, up from their previous prediction of just 2.9%.

Rising rent prices and now higher mortgage rates—which soared from an average of just 3.2% at the start of the year to 5.81% by mid-June—have driven up the cost of housing, pricing many people out of the market. This has caused home sales to begin falling as more people can no longer afford homes at the current heated prices.

For the fourth month in a row, existing-home sales dropped, sliding 3.4% in May from April and down 8.6% from the same period last year, according to NAR.

“The monthly [principal and interest] payment required for the average home purchase is up nearly $600 since the start of the year, and factoring in current income levels housing is now within a whisper of the record low affordability seen at the peak of the market in 2006,” said Ben Graboske, president of Black Knight Data & Analytics, in a statement. “Even modest increases in either rates or home prices at this point would push us over that line.”

Housing Inventory Predictions for 2022

Home prices might expand, but the options will, too, according to some economists.

The Realtor.com inventory forecast made a sharp change in course from the beginning of the year to now, going from just a 0.3% rise in inventory to their current prediction of a 15% jump in the for-sale housing stock.

“While housing costs remain high, pushing home shoppers to make tough choices about their budget priorities, the number of homes for sale is expected to continue to grow, building on the turnaround begun in May,” according to the Realtor.com report.

“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.”