Housing Market Outlook 2022: Lingering Economic Uncertainty

When Elon Musk tweets about a recession timeline, people pay attention. His exact tweet was, “Predicting macroeconomics is challenging, to say the least. My gut feel is maybe around spring or summer 2022, but not later than 2023”, a response to someone asking, when do you think the next recession will be. This exchange was sent in the fourth quarter of 2021.

It seems that this is a common consensus among housing experts that the next recession will happen in 2022. The most important thing to remember is that the housing market is cyclical, and it follows the economy. So, if there is an impending recession, we can expect the housing market to follow suit. 

The current state of the economy is still on shaky ground. The stock market has been bouncing back and forth. Housing prices have also plateaued in many areas across the country, although they are still increasing overall. So what does this mean for any housing market predictions in 2022? 

This blog article will cover current real estate trends, housing market expectations, the top housing markets, the most fragile housing markets, and opinions on whether or not a crash is imminent.

Housing Market Outlook 2022

Trends in the Residential Real Estate Market: Housing Prices Stable

Here are some of this year’s latest real estate trends from our nation’s leading housing experts:

  • The National Association of Realtors forecasts that the median sales price of existing U.S. homes will rise by about two percent in 2022 to $269,000. 
  • The Core Logic Home price index shows a national index slowing to 7% in 2022 as compared to the annual average rise of 15% in 2021. 
  • Lawrence Yun, chief economist at the National Association of Realtors, claims that home sales have increased since last year’s numbers were released. According to him, this is most likely due to a stronger employment market and concerns among potential buyers on rising mortgage rates.
  • Changes in the mix of sales are one more variable that continues to push higher prices, according to C.A.R.’s Senior Vice President and Chief Economist Leslie Appleton-Young.
  • Home price growth is up year over year by 18.5% in the third quarter of 2021, according to the Federal Housing Finance Agency House Price Index (YOY).

Will The Real Estate Market Crash in 2022?

Real estate bubbles happen when home price growth is caused by high demand, speculation, and overspending to the point of collapse. Traditionally, housing markets have been less prone to bubbles than other financial markets due to the high transaction and holding costs connected with homeownership. However, there are several indicators that the market is becoming overheated. 

These include: 

  • Rising prices with low inventory
  • High levels of debt among buyers
  • Low-interest rates make it possible to finance and afford a home at a higher price
  • The increase of investor activities in our real estate market
  • The rise of new home construction

If anyone or more of these factors change, it could trigger a domino effect and lead to a market crash. For example, if interest rates go up or the availability of credit decreases, this would cause buyers to lose purchasing power and lead to a decrease in prices. This in turn would cause investors to sell their assets, which would lead to a rapid increase in inventory leading to further home depreciation.

So while it’s impossible to say for certain whether or not the housing market will crash in 2022, all signs point to a possibility of this happening. We are unquestionably in a severe bubble, and the question isn’t whether the housing market will crash but when. I believe that areas that surround tech hubs will be the first to experience a significant decrease in prices, with California and the Northeast being the worst hit.

Hot Housing Markets: Possible Housing Bubble?

Buying a house is by far one of the most difficult things to accomplish in 2022. The majority of the states in the U.S. are considered to be a seller’s market. However, I would consider purchasing a home in certain cities, although there are certain areas that I would avoid at all costs.

Here is my list of some of the best and worst markets to be in at the moment based on inventory, home prices, and migration data.

1. Florida is by far the Top market 

Florida leads the U.S. with the highest inbound migration numbers in 2021. This is due to a combination of solid economic fundamentals, as well as the fact that it has a beautiful warm climate. The market’s inventory is currently low, but demand is expected to continue growing.

2.  Georgia is a Close Second

Georgia is expected to keep going strong as well. The city of Atlanta has seen an increase in inbound migration due to job opportunities and the cost of living being more affordable than other major metropolitan cities.  Housing prices are on the rise, but inventory is still reasonable. 

3.  The Carolinas are Safe

The Carolinas are a safe place to buy a home in 2022. Both North Carolina and South Carolina have seen an increase in migration due to great job opportunities and affordable cost of living.  Housing prices are expected to rise, but inventory is still ample.

4.  Indiana is super affordable

The Hoosier state’s economy is exploding. Housing prices are still affordable and the cost of living is low. Indiana is attracting a significant number of people from nearby states such as Illinois and Michigan, who are relocating there for a better opportunity.

5.  Texas is doing well but still faces issues

Overall, Texas is doing well in terms of job creation and population growth. In fact, most would consider Texas to be a booming economy. However, rising prices in Dallas/Fort Worth and Austin are not keeping up with wages which is pushing these two cities into the unaffordable territory. 

6.  Arizona is hot but too overpriced

Phoenix and Tucson are the top two markets in Arizona. I believe that these markets are overheated and will see a price correction soon. Although we may see a dip in prices, many parts of Arizona will continue to thrive.

7.  Massachusetts is starting to cool off

Boston is the top market in Massachusetts. Although it is cooling off, it’s still doing well comparatively. Housing prices are high but inventory is low. 

8. New York is at the tipping point

New York City is hemorrhaging home buyers. The amount for homes for sale is increasing in the major metro areas of New York but are still low out near the suburbs. Home prices are still unaffordable and many businesses are moving away due to the high taxes and regulations.

9.  California is in a Down Turn

In terms of unaffordability, unemployment, and a declining population, California is far ahead of the competition. The combination of slowing job growth and increasing interest rates are making it difficult for people to afford a home in this state. There has already been a mass exodus in individuals leaving this state to seek a more prosperous financial situation.

10.  Idaho is already crashing

Idaho is currently the worst-performing state in 2022. Inventory is up 62% year over year and home prices are already dropping. Expect this state to keep getting worse as sales growth keeps declining.

Will home prices fall in 2022?

There are many different opinions from housing experts on what will happen in the year 2022. But all the data points to a slowdown occurring in 2022 and it will most likely continue this way for the next few years afterward. While there may still be some growth in certain areas of the country, it is likely that home prices overall will start to drop or stay flat in 2022. 

House Market Predictions for the next 5 years

Housing Market

Although no one can predict the future with 100% certainty, here are my thoughts on what could happen in the U.S. Housing Market over the next five years:

  • The housing market will slow down in 2022 and continue to do so for a few years after that. 
  • Home prices will start to drop or stay flat in many areas of the country as affordability becomes an issue. 
  • The real estate bubble will have the most significant impact on technology clusters throughout the country, as investors withdraw from these fields.
  • Other factors such as automation, the rise of populism, and the changing global economy will also have a direct impact on our property markets but it will take longer to develop than the predicted market crash in the next five years. 

What do you think will happen in the U.S Housing Market over the next five years? Let me know in the comments below!

Find a Houston Real Estate Investor | Ricky Pok | Wabi Sabi Realty Group

As always, it is important to do your due diligence when deciding to work with someone regarding selling your house. I started Wabi Sabi Realty Group as a way to help distressed clients that I couldn’t do otherwise while I was working as a mortgage lender. I was always troubled about how we had to decline or pawn off clients just because they were facing a situation that became way too complicated.

At Wabi Sabi Realty Group, we buy homes in any condition for all cash, without any fees or inspections, and have years of experience in the Houston, TX market. We are also dedicated to seeing all transactions through and are willing to invest upfront on transactions to make sure there are no complications during the home selling process.

If you or someone you know may be dealing with an issue that may require a real estate investor, please do not hesitate to reach out. Even if you believe that a real estate agent may be better suited, still feel free to reach out and I can definitely put you in contact with the top agents in your local market. For more information about how we can assist you, please give us a call at 281-306-5721 or fill out the form. We will be happy to talk to you about how we can buy your house for cash and close at a time that is convenient for you

Areas We ServeBaytown, Conroe, Cypress, Deer Park, Galveston, Houston, Humble, League City, Missouri City, Pasadena, Spring and Sugarland, Texas.

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