Where will home prices and rents go in 2022?

Since the pandemic started, we have seen record-low mortgage rates, record-high home prices, and continually rising rents. So where the heck are things going and what should we expect to see over the next 12 months? The cost of housing impacts the economy, but also has an influence on the relocating employee experience — whether that is the benefit of quickly selling your home above list price, having to pay more in your destination for your new home, or shelling out more for rent due to record hikes nationwide.

Per Zillow, the trend that began in 2020 of moving to more affordable areas — as rapidly rising home values and more remote-working jobs allow people to seek out locales where their home-buying dollar goes farther — continued throughout 2021. The top destinations for net inbound moves in 2021 were mid-priced growing Sunbelt metro areas, while the top origins for net outbound moves were in places that are generally colder, pricier, or both. "The Dallas-Fort Worth metro area topped the rankings for the most net inbound moves in 2021, pulling in movers especially from pricey Los Angeles and chilly Chicago, as well as fast-growing Phoenix." On the outbound side, Chicago topped the list of metro areas by sending the most movers south and west to Phoenix, Dallas-Fort Worth and Los Angeles. 

According Realtor.com, most experts are saying that the housing market is going to normalize, meaning that the market will slow down although prices will remain high due to inventory staying tight and mortgage rates rising. And while that is better news for buyers, it will continue to be pretty challenging in most markets, especially for first-time buyers. The current "seller's market" isn't going away, it just won't be as intense as it has been. In fact, prices will still go up, just not to the degree we have been experiencing — the pace of growth will slow considerably. 

"Economists anticipate (home prices will) increase at a much slower rate of just 2.9% over this year compared with an anticipated 12% rise in 2021." (Realtor.com)

Demand will remain high and inventory low, in part because builders are having a tough time ramping up construction as they deal with shortages in workers and materials, compounded by the global supply chain backups. The reality is that homes will keep selling very fast, so those relocating will benefit from being ready to make quick offers. Understanding that new housing market, getting approved in advance and going in with a "ready" mindset will provide them with an advantage.

Millennial needs and remote work have set the stage for the ongoing trend of increased movement to the suburbs. With more workers telecommuting or going into the office only a few times a week, they don’t have to contend with grueling commutes five days a week.

"Many are more comfortable moving farther outside of the cities where they can get larger abodes with room for a home office at an attractive price." (Realtor.com)

The one variable that could slow things up more is the expected increase in mortgage rates. Inflation and the rising cost of living could curb the price growth because buyers just can't go there and sellers will need to adjust. Based on the central bank’s conclusion that inflation is no longer “transitory,” mortgage rates will likely begin an upward trend in order to combat it. How much will mortgage rates rise? Realtor.com anticipates mortgage rates will rise to an average of 3.3%, hitting around 3.6% by the end of 2022 for 30-year fixed-rate loans. The ongoing monthly costs for owning a home are going to go up without a doubt.

How about rents in 2022? Apparently, renters should expect worse than homebuyers! The national median rent hit a new all-time high as prices have surged and are expected to continue rising by 7.1% in 2022. In fact, November marked the fifth straight month of double-digit rent increases with rents rising 19.7% year-over-year in the 50 largest metropolitan areas  (Realtor.com November Rental Data). Vacancies are near historic lows, demand remains incredibly high, and landlords are still making up for lost rent at the beginning of the pandemic. As employees make more money, landlords expect to be able to charge as much or more than ever, and with an end to many of the eviction moratoriums, they are able to raise rents. Given that housing markets have been too high for many to buy into, it has pushed up the millennial rental market demand and prices will continue to climb.

"Rental prices, as measured by the Zillow Observed Rental Index (ZORI), initially fell during the pandemic but have since recovered and now exceed their pre-pandemic trend." (Zillow)

Affordable housing will remain a huge topic in 2022 and rent control policies will remain in debate along with ongoing analysis of the impact of eviction moratoriums. If you are looking to dive in deep, try a few of these opinions from Forbes, where nearly 50 experts from across a wide array of expertise —  including economists, real estate agents and financiers —  provide their insights into what is to come in 2022 housing markets!