After a record year of home appreciation in 2021, Andrew Shader believes home prices will continue increasing but slower. His belief is founded on supply and demand data indicating that home prices will continue growing in 2022.
Housing Shortage Leading To Record Price Growth
As with any market, supply and demand are the driving forces of price growth. Therefore, when homes are in high demand and in short supply, the housing market will inevitably increase in value.
According to the S&P/Case-Shiller U.S. National Home Price Index, home values have increased 21% year over year from 2020 to 2021.
Some contributing factors to this tremendous growth were low-interest rates and record-high inflation. However, the national housing shortage led to the core of this growth.
Research conducted by Freddie Mac indicated that the United States was short as many as 3.8 million housing units in 2020. However, it’s essential to know that real estate is highly localized, and not all regions face housing shortages.
Only a few select markets face a medium-to-high housing shortage. These include major metro areas like Chicago, Detroit, Portland, Seattle, Southern California, and New York City.
Furthermore, many markets experiencing high inward migration in the Sun Belt and Southeast have sufficient supply for their population and growth. As a result, the rise in home prices is mainly led by housing markets in major metropolitan areas.
Why Home Appreciation Will Cool Down in 2022
The Federal Reserve plays a significant role in deciding whether home prices will continue increasing or not in 2022. There have been indications that the Federal Reserve intends to raise interest rates and pull back on economic support in the financial and bond markets.
A rise in interest rates means that borrowing money to purchase homes will be more expensive, and overall demand will decrease.
However, experts predict that the Federal Reserve won’t start incrementally increasing interest rates until the end of 2022 or 2023, so it remains to be seen how the housing market will be affected.
For this reason, you can expect home prices to continue growing until a formal announcement is made. After that, homeseekers may scramble to lock in rates and overpay for existing stock.
Home Prices in 2022
Although home prices aren’t expected to grow in price as they did in 2021, they will continue moderately increasing in 2022. The Home Price Expectation Survey predicts a 5.12% appreciation level in 2022.
Furthermore, the Mortgage Bankers Association calls for an 8.40% appreciation level next year.
If you’re considering buying a home now, Andrew Shader recommends making a well-informed decision as soon as you can since home prices are expected to continue growing in 2022.
About Andrew Shader
Andrew Shader is a real estate investor, developer, and entrepreneur based out of Fort Lauderdale. Shader started as an entrepreneur in the insurance industry before discovering his real estate passion: finding scalability in any vertical. Andrew’s real estate strategy specializes in finding value-added properties and increasing their property value by upwards of 60% — without needing to rely on future appreciation.
