America's Red-Hot Housing Market Won't Be Cooling Down Soon
Zillow expects the year-over-year rate of home price growth to peak at 21.6 percent come May
Even with the arrival of a new year, there appears to be no end to America’s highly competitive housing market.
The S&P CoreLogic Case-Shiller U.S. National Home Price Index recently showed that home prices skyrocketed by 18.8 percent in 2021, the largest increase seen in thirty-four years. That hefty gain follows 2020’s sizable 10.4 percent rise.
With this in mind, many potential homebuyers are now hoping that the red-hot market has finally hit its peak. Not so fast, says Clare Trapasso at Realtor.com.
“Any buyers … who thought last year’s meteoric jump in home prices was rough should be prepared for this spring to be even worse,” Trapasso writes.
“A hellish trifecta of fast-rising housing prices, increasing mortgage rates, and record-low inventory of homes for sale is likely to present a brutal spring real estate market for those looking to purchase a new home,” she continues.
Mark Zandi, the chief economist at Moody’s Analytics, told the real estate listings website that “for the buyers, it’s going to be miserable. We’re going to see a lot fewer home sales this spring. … In many communities, they don’t have something to sell.”
Zandi’s sentiments appear to be supported by Zillow’s research, which now expects the year-over-year rate of home price growth to peak at 21.6 percent come May.
“Annual home value growth is likely to continue accelerating through the spring before peaking at 21.6 percent in May, before gradually slowing through January 2023,” the researchers wrote. “Monthly home value growth is also expected to continue accelerating in coming months, rising to 1.7 percent in February and growing to 1.9 percent in April before slowing somewhat.”
Zillow is now predicting that by the end of January 2023, the typical home is expected to be worth more than $380,000.
Eyes on Rising Mortgage Rates
Furthermore, as mortgage rates continue their trek higher, there is another factor that could further exacerbate the inventory crunch in the housing market.
“Homeowners who locked in ultralow rates may be reluctant to sell their homes and buy new ones if their monthly housing payments will be higher thanks to those rising rates,” Trapasso writes.
According to Danielle Hale, chief economist at Realtor.com, “mortgage rates will be both friend and foe to buyers this year.”
“Monthly mortgage payments will be higher,” she continued. “However, those higher monthly mortgage payments are likely to knock some homebuyers out of the market. You may see somewhat less competition.”
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.