U.S. Home Price Will See Slow Rise in 2022
Rocketing U.S. house price rises will accelerate more slowly in 2022, halving this year's double-digit pace but still climbing much faster than experts predicted three months ago, according to a Reuter’s poll of analysts who said homes would get even less affordable. Record low interest rates and home workers seeking bigger living spaces have ratcheted up housing demand at a time when affordable homes are scarce. The 30 housing analysts polled Aug. 10-25 lifted the average prediction to slightly over 14% U.S. house price inflation this year, up from May's 10.6% forecast. They predicted a rate of 6.7% next year, up a bit from 5.6% predicted previously. If realized, the 2021 median projection would be the highest full-year rise in house prices since 2005, right before the global financial crisis that was triggered by an overinflated housing market. There are already signs the market is cooling. But even the near-halving predicted in the rate of inflation next year would still have house price rises far outpacing wage growth and overall inflation, making homes even less affordable. Over 60% of analysts who answered an additional question, 16 of 26, said affordability would worsen in the next two to three years. Six said it would stay the same while only four expected affordability to improve. "The shortage of homes for sale and related deteriorating affordability present the biggest risk to home sales. Supply constraints, of materials, lots and labor are preventing more construction. Some of these constraints, including shortages of labor and lots, pre-date the pandemic," said Gregory Daco, chief U.S. economist at Oxford Economics in New York. New home sales (USHNS=ECI) are concentrated in the $200,000-$749,000 price range, according to the latest data. Sales in the highly sought-after under-$200,000 price bracket accounted for a mere 1% of transactions. Benchmark interest rates, expected to stay near zero through all of next year, keep providing a big impetus for those who can afford to borrow. Asked about the biggest downside risk to the housing market outlook over the next 12 months, analysts' top three picks were: higher interest rates or tighter monetary policy; the spread of new coronavirus variants; a slowdown in economic growth.