2021 & 2022 US Housing Market Forecast: Is It Set to Crash or Boom?

Record low mortgage interest rates combined with a dearth of homes for sale have made 2021 a seller's market. However, with interest rates projected to rise in 2022 and 2023, will this trend continue? That depends on whom you ask and opinions abound in both directions.

Flattening The Curve On The Housing Boom

Although analysts don't predict a bubble-bursting downturn, they do suggest that the current seller's market conditions will level into a more even playing field for buyers. The year 2022 will likely see a gradual increase in mortgage interest rates. The supply of housing – which was somewhat depleted by the hurricane season and issues in the oil industry – is gradually increasing. Global conditions increased the work-from-home status of many who began looking for larger homes further from their employer or smaller homes closer to their jobs.

Even though supply increased somewhat in the second half of 2020, builders ran into labor and materials shortages. Social distancing mandates made labor difficult to find, and months of manufacturing inactivity had dramatically reduced the inventory of building materials. The combination of all these factors resulted in the housing boom of 2021.

What's Available?

The second half of 2021 has seen smaller, more affordable homes available and a small upswing in new listings, which have risen by a mere 1.2%. New listings are traditionally an indicator of a buyer's market.

If the current trend continues, inventory at the end of 2021 will remain less than in 2020, but analysts expect home sales to remain stable. Both June and July saw an increase in sales of existing homes, marking 113 straight months of sales increases but it's about 80% of previous years' increases according to Norada Real Estate Investments. The 2021 sales figures for homes by price are as follows:

  • Homes priced $100,000 to $250,000 fell by 28%
  • Homes priced $500,000 to $750,000 rose by 32%
  • Homes priced $750,000 to $1 million rose 53%

Overall sales remain somewhat steady between 5.5 million and 6 million units with the median price at about $359,900 – a 17.8% increase from July 2020. June, July, and August saw homes on the market for about 39 days which is about 15 days shorter than previous averages.

The Overall Picture

Housing supply remains relatively limited, so home prices are expected to continue upward, especially in more expensive homes and due in part to the current low mortgage interest rates. For those who are interested in buying real estate before the interest rates rise, now is a good time. Usually, investment in real estate is a sound option that can provide short-term or long-term dividends. Although the housing supply remains historically low, the low interest rates can make the somewhat higher prices very affordable.

The current housing market isn't projected to burst in 2022 or 2023, but interest rates are expected to rise from their current historic lows. The current seller's market is expected to return to a more balanced state, so it's a good time to invest in real estate.

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