Next year might not have the runaway home-price growth that 2021 saw, but some markets are set to see prices increase significantly next year.

A survey was conducted be the National Association of Realtors of over 20 housing and economic experts to gauge their predictions of inflation, interest-rate movements and home-price growth in the year ahead. The group expects that median home prices will increase by 5.7% next year, compared with an overall 4% rate of inflation.

Meanwhile, these experts think the Federal Reserve will hike interest rates twice by 0.25%. this week, the Central Bank stated it was expecting three interest-rate hikes in 2022, as well as three more in 2023 and two more in 2024.

Depending on whether the Fed’s recent projection holds true, the speed of home-price growth might be even lower in 2022.

“Slowing price growth will play a role in the interest rate hikes put in place by the Federal Reserve,” Lawrence Yun, said. Increased rates will slow down home sales, which Yun expects will fall to 5.9 million from the yearly rate of 6 million that has been estimated for all of 2021.

Some undervalued housing markets might attract buyers in 2022

Amid this backdrop, though, the National Association of Realtors predicts some housing markets will see bumper price increases. The organization’s economists made a list of 10 “hidden gem” housing markets where price appreciation will be faster than the national avg. These markets include the following: Dallas-Fort Worth, TX, Daphne-Fairhope-Farley, AL, Fayetteville-Springdale-Rogers, Ark.-Mo, Huntsville, AL, Knoxville, TN, Palm Bay-Melbourne-Titusville, FL, Pensacola-Ferry Pass-Brent, FL, San Antonio-New Braunfels, TX, Spartanburg, S.C, Tucson, Arizona.

“Several markets did fairly well this year, but not as strong as expected,” Yun said. “Therefore, next year, these ‘hidden gem’ markets have even more room for growth.”

Aside from location — all 10 markets are located in the South or the Sun Belt regions — these housing markets share some other similarities. The markets were thought to be undervalued, which means that the ratio of median home prices to median household incomes was at the low end of the spectrum for the almost 400 markets that the organization studied.

Economists also factored in things such as domestic migration, broadband service and population growth, in identifying the undervalued markets.

“We think we are still going to see a large amount of activity in the Mountain West region,” Danielle Hale, economist at Realtor.com, stated during a real-estate forecast summit that was hosted by the National Association of Realtors this week. “But it isn’t just in the Mountain West — we also think there will be pockets in the South, New England, and in the Midwest where affordable homes really help incentivize homeownership.”

Other economists, though, had a less upbeat outlook on price growth in the markets that have seen large demand from home buyers in recent years.

Ken Johnson, who is a professor at Florida Atlantic University and a real-estate economist, said his data has shown decreasing premiums for houses in the West and a slowdown within those markets. Overall, he warned that buyers should look at whether homeownership is the best way to grow their wealth.

“We are near the height of the current cycle,” Johnson explained during the Realtors summit. “It does not always seem smart to buy near the top of the cycle when it’s possible for you to be renting and reinvesting.”

Author: Steven Sinclaire

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