Despite the record-setting January housing market, a new report from Redfin forecasts flattening home sales as mortgage rates approach 4% this year.
Home price growth has been in the double-digits since the summer of 2020, though, Redfin’s forecast expects it to slow to an annual rate of 7% by the end of 2022. Throughout the year, home sales are projected to remain flat, akin to the small annual rate Redfin has been posting since August 2021 due to the shortage of homes for sale. Meanwhile, the 30-year fixed mortgage rate is expected to rise steadily to 3.9% over the course of the next year.
“Even though the price of homebuying has never been higher, demand is only getting stronger,” said Redfin deputy chief economist Taylor Marr. “Some of that demand may be a reflection of buyers’ urgency to get ahead of rising rates, leaving a lot of uncertainty about how strong home sales will be in 2022. Nonetheless, the ongoing supply and demand imbalance is pushing home prices up and up because there are enough eager buyers to rapidly buy up nearly every home that hits the market. By this summer, higher prices and rates may cause buyers to pull back from the market.”
In January, pending sales fell 2%, marking the largest annual decline since June 2020. Analysts found that sales activity continues to be stalled by a lack of home supply, as 11% fewer homes were listed for sale than during the same period last year, and total active listing fell 29% to an all-time low.
Still, homebuyer demand remains strong. Pending sales were 38% higher in January than they were two years ago, weeks before the pandemic began, despite there being half as many homes for sale. Just over half (51%) of homes that were bought spent two weeks or less on the market, which is the highest rate on record for January. The pace of home sales is quickly racing toward a new all-time high speed, despite homes becoming more expensive than ever.
The estimated monthly mortgage payment for a typical home for sale soared 23% year over year to an all-time high of $1,877, due to a combination of rising mortgage rates and asking prices, which also reached a new high.
