Home Prices Decline In 2022

With the current landscape in the housing market, many potential buyers are wondering if their investment in a new home will be strong. Buyers are already walking into buyer’s remorse with home prices remaining high, but what will happen if prices start declining? Many buyers are wondering if buying a home now will lead to a decrease in value by the next year. However, there is some good news for those worried about home prices declining in 2022. Here is the average home price projections for 2022 and why a home prices decline in 2022 is not likely.

Home Prices And Supply

With the ongoing supply constraint in real estate, buyers still outnumber sellers at historic rates. In Louisville, the inventory for houses on the market has reached levels of below one month of inventory, as of December 15th, 2021. Because of this economic principle, home prices will look to stay elevated until the supply constraint is abated. Many economists are still expecting the prices of homes to increase, but at a more manageable rate. When supply is increased or buyers are decreased is when we can expect to see home prices begin to stall or decrease. However, this is not something that we will see in the next year because of the backlog of demand.

While there is typically a seasonal shift in real estate for the winter months, this year hasn’t looked as seasonal. However, this does not mean that there is not sellers who are waiting to list their homes after the holidays. In fact, the spring is one of the best times in the real estate market in terms of seasons. Even with more sellers listing come the new year, this does not move us out of the supply uncertainty though. Because of the supply issue looking to persist well into the next year, projections show price appreciation continuing. While it is at a more moderate rate, around 5% on average, this is still a 5% increase a year after seeing 16% increases.

Home Price Projections

The main takeaway from the projections given by experts is: there will not be a price decline. The only way prices look to move the next year is up. While it is not a complete guarantee, it seems almost inevitable to be paying more for property over the next 12 months. Our favorite economist, Danielle Hale from realtor.com, agrees. She is quoted saying:

“Price growth is expected to move back toward a normal range, but this is on top of recent high prices, . . . So prices will [still] hit new highs. . . . The pace of price growth is going to slow notably . . . ”

Bottom Line

With home price appreciation expected to continue throughout the year, it is expected to slow down in acceleration. It will not be a at the rates we saw in 2021, which is fortunate for buyers, especially first-time or first-generation buyers. It is important to take away from this research that home prices will not decline, but will not accelerate at historic rates we saw in 2021. This is superb news for motivated buyers, as they will stop being priced out of the market as much.