Will an influx of new inventory push U.S. home sales in 2022, or will falling affordability push buyers to the sidelines and dampen activity? A new Zillow poll has revealed that economists and housing industry observers are split on where the market is headed this year.
When asked if home sales will grow or decline this year compared to last year, 41% of participants in Zillow’s Home Price Expectations Survey answered that sales were on the way up — but another 41% replied that a decrease was in the cards. Eighteen percent of respondents believe that sales will be flat on a year-over-year basis.
Zillow’s own forecast, most recently released in December, calls for a 6.5% increase in existing-home sales. This forecast was based on recent sales trends, anticipated household formation rates and expectations that interest rates will stay relatively low.
Bearish experts who participated in Zillow’s survey, however, continue to be concerned with the financial pressures hefted onto buyers by still-soaring home prices. Fifty-four percent of respondents pointed to worsening affordability as the most important reason for a sales decline, while rising mortgage rates — especially given the Federal Reserve’s suggestion that three rate hikes could be on the table in 2022 — were cited by 28% of respondents.
Those bullish about sales growth, on the other hand, look to an improving inventory picture as reason for optimism. Fifty-one percent pointed to an increase in existing-home listings as the most important reason for a sales uptick while 21% cited more new homes being built.
Zillow senior economist Jeff Tucker said that which way the needle ultimately points will be largely tied to buyer and seller psychology.
“In America’s frenzied pandemic-era housing market, buyers and sellers have both defied expectations,” Tucker said. “Buyers have forged on in the face of record-fast price appreciation, and homeowners have steadfastly demurred from cashing in on this selling opportunity.”
“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.”