SEATTLE, Dec. 8, 2021 /PRNewswire/ -- The housing
market may not reach the incredible heights of 2021, but Zillow®
economists predict it will be anything but slow next year. Expect
the strong sellers market to persist, the Sun Belt to maintain its
top spot as the most in-demand region, and flexible work options to
continue to shape housing decisions in new ways in 2022.
Zillow's housing predictions for 2022:
2022 will fall just short of record-breaking
2021
marked the hottest housing market in U.S. history by some measures,
including Zillow's Home Value Index. While we may not see those
records broken in 2022, Zillow economists expect incredibly strong
price growth and sales volume to continue.
Zillow's forecast calls for 11% home value growth in 2022.
That's down from a projected 19.5% in 2021, a record year-end pace
of home value appreciation, but would rank among the strongest
years Zillow has tracked. Existing home sales are predicted to
total 6.35 million, compared to an estimated 6.12 million this
year. That would be the highest number of home sales in any year
since 2006.
Sellers keep the upper hand
The usual seasonal
cooldown in the housing market is reappearing this fall after
a hiatus in 2020. Fewer homes are selling above list price, homes
are staying on the market a few days longer than they did during
the summer, and more sellers are cutting their price.
Zillow economists expect these metrics to trend slightly cooler
in 2022, but don't mistake that for a buyers market. The market
forces that have given sellers the upper hand over the past two
years or so — tight supply after years of underbuilding, and
elevated demand due to remote work, U.S. demographics and low
mortgage rates — will persist next year as well. Expect to see
bidding wars on many homes, especially as the market heats up
during the spring and summer shopping season.
Large rentals will be in high demand
Rising home
values will impact the rental market as well. After a slowdown in
the early months of the pandemic, rent prices came roaring back,
especially in what were previously some of the most affordable
markets. As rising costs make it harder to save for a down payment,
expect demand for larger rentals to increase, including for
single-family homes, as families stay in the rental market
longer.
The 'Sun Belt surge' will extend to secondary
markets
2021 was in many ways the year of the Sun Belt.
Zillow predicted Austin would be
the hottest market of 2021 as part of a "Sun Belt surge,"
which proved to be the case — no metro has seen home values grow
more than Austin so far this year,
and all of the top destinations for long-distance movers were
in the Sun Belt.
Zillow predicts this surge will extend to smaller Sun Belt
cities in 2022 as price hikes in this year's star markets make
more-affordable nearby markets more attractive. From April to
August, Austin held the top spot
in quarter-over-quarter home value growth, which is a good
indicator of current housing demand. As of October, the smaller
Florida metros of Fort Myers and Sarasota held the top spots, and 24 of the top
25 markets were in sunny states – a sign of things to come in
2022.
More Gen Zers and millennials will buy a 'second home' before
a primary residence
Americans are taking advantage of remote
work flexibility to move to larger homes in more-affordable
markets, but many will not want to commit to a new location
full-time. This is often true for younger people who are attracted
to the amenities of living in a city, where expensive housing is
more likely to put homeownership out of reach.
With these factors in play, there may be more people
buying what's traditionally a second home — either a part-time
vacation home or an investment property — before they buy a home as
a primary residence.
Young people today are savvy watchers of the housing market, in
part because of time spent Zillow surfing. Purchasing a "second"
home in a market more affordable than the one they live in is a way
to break into the market and start building equity while mortgage
rates are low, possibly teaming up with friends or family to lessen
the financial burden. Virtual home shopping tools available
today, such as Zillow 3D Home® tours, make buying a home in a
far-flung location easier.
No end in sight for the renovation boom
In the race to
buy a home in the ultracompetitive pandemic housing market, many
buyers have had to make one or more compromises (81%).i
As prices and mortgage rates rise, expect many homeowners to
upgrade their existing home rather than try to wade back into the
market to trade up.
A Zillow survey of homeownersii found nearly
three-quarters would consider at least one home improvement project
in the next year. The top projects on their to-do list are
renovating a bathroom (52%) or kitchen (46%), adding or improving a
home office space (31%), finishing a basement or attic (23%),
adding a room (23%) or adding a separate dwelling unit
(21%).
Work will play a key role in moving decisions
The rise
of flexible work options has changed how heavily a short commute
factors into where Americans live. Home buyers used to pay
handsomely to live near downtown and reap the benefits of a
quick trip to and from the workplace each day, but that dynamic
flipped in much of the country last year as buyers prioritized
affordability and extra space. In 2022, hybrid and fully remote
work will continue to reshape which areas are most in demand as the
pandemic winds down and more workers receive permanent guidance on
their flexible work options.
Zillow economists expect fully remote workers to continue to
seek affordable markets, like those in the Sun Belt and other
nontraditional housing hot spots where they can afford to buy their
first home or trade up for a bigger one. And amid the "Great
Resignation" and a generally aging population, traditional
retirement markets are likely to see elevated demand.
New construction gains will only be a drop in the bucket
despite best efforts of builders
The reason home prices are
rising so quickly is economics 101: high demand and low supply.
Zillow research shows that in the 35 largest housing markets
alone, there has been a shortfall of 1.35 million new homes since
2008 because of a construction slowdown following the housing
crash. Home builder confidence is sky-high, and builders are
doing all they can to get houses up, but supply chain snags and
labor shortages are limiting progress. The gap shrunk in 2021 and
will likely shrink again in 2022, but the housing shortage will be
a defining feature of the market once again next year.
About Zillow Group
Zillow Group Inc.
(NASDAQ: Z and ZG) is reimagining real estate to make it easier to
unlock life's next chapter.
As the most visited real estate website in the United States, Zillow® and its affiliates
offer customers an on-demand experience for selling, buying,
renting or financing with transparency and ease.
Zillow Group's affiliates and subsidiaries include Zillow®,
Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow
Closing Services™, Zillow Homes Inc., Trulia®, Out East®,
ShowingTime®, Bridge Interactive®, dotloop®, StreetEasy® and
HotPads®. Zillow Home Loans LLC is an Equal Housing Lender, NMLS
#10287 (www.nmlsconsumeraccess.org).
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i Zillow
Population Science Prospective and Successful Buyer Intentions
Survey, 2021.
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ii Zillow
Group Population Science conducted a nationally representative
survey of more than 2,000 homeowners. The study was fielded in
November 2021. For more information on methodology, please reach
out to press@zillow.com.
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SOURCE Zillow