Last weeks video focused on whether to buy now or wait 6-12 months. We looked at what the experts are saying and I gave my opinion as well. This week we’re going to take a deep dive into Zillow and Redfin’s bold housing predictions and compare the differences (of which they are significant) and the similarities. Both Redfin and Zillow have their own research departments and pride themselves on their technology so one would think their predictions should hold credibility. I’ll let you decide after we go through them if you agree. I do have to point out that Zillow in particular has gotten their zestimates wrong many many times over my 18 years in real estate. I can’t even count how many times a seller looked disappointed after I showed them real data, real comps that contradicted zillows high price value aka zestimate or had to explain to a buyer they weren’t getting ripped off by a seller because the sellers list price was significantly higher than zillows value. Zillow has never been inside the homes so they are unaware of improvements and values that are specific to neighborhoods including schools and amenities.
But I digress! Let’s take a look and compare the two brokerages on their bold housing predictions for 2022! Let’s just dive right in!
Redfin: Redfin Predicts a More Balanced Housing Market in 2022
Don’t expect a buyer’s market; just more selection, less frenzy and slower price growth. We will see a rush to buy homes at the start of the year before mortgage rates rise. hat early onslaught of demand will deplete the supply of homes for sale. In the second half of the year, a much needed increase in new construction will boost sales slightly.
Zillow: 2022 will fall just short of record-breaking.
2021 marked the hottest housing market in U.S. history by some measures, including Zillow’s Home Value Index. While we may not see those records broken in 2022, Zillow economists expect incredibly strong price growth and sales volume to continue. The market forces that have given sellers the upper hand over the past two years or so — tight supply after years of underbuilding, and elevated demand due to remote work, U.S. demographics and low mortgage rates — will persist next year as well. Expect to see bidding wars on many homes, especially as the market heats up during the spring and summer shopping season.
Redfin: By the end of 2022, home price growth will slow to 3%
In 2022, there will be 1% more sales than in 2021, and by the end of the year, home price growth will slow to 3%.
Zillow: Zillow’s forecast calls for 11% home value growth in 2022.
That’s down from a projected 19.5% in 2021, a record year-end pace of home value appreciation, but would rank among the strongest years Zillow has tracked.
Redfin: New listings will hit a 10-year high, which will hardly make a dent in the ongoing supply shortage
In 2022, new listings will surpass the 2018 high of 7.6 million homes, setting a new record going back to at least 2012.
As the market becomes more balanced, homeowners will find it less daunting to list their home while looking for a new one to buy. Home-sale contingencies, which allow a homeowner to make an offer to buy a new home on the condition that their existing home sells first, will become more common. The end of double-digit price growth will also encourage more homeowners to finally cash-out.
Zillow: Existing home sales are predicted to total 6.35 million, compared to an estimated 6.12 million this year. That would be the highest number of home sales in any year since 2006.
Redfin: RE: New construction: builders face a lot of roadblocks, which will keep supply from reaching its full potential next year. Labor shortages, lot delays and supply chain challenges are all making it harder and more expensive to build new homes. New home inventory should increase from 2021’s bottom, but we anticipate the market will remain undersupplied.
Zillow:New construction gains will only be a drop in the bucket, despite best efforts of builders. There has been a shortfall of 1.35 million new homes since 2008 because of a construction slowdown following the housing crash. Home builder confidence is sky-high, and builders are doing all they can to get houses up, but supply chain snags and labor shortages are limiting progress. The gap shrunk in 2021 and will likely shrink again in 2022, but the housing shortage will be a defining feature of the market once again next year.
Redfin: Rents will increase by 7%. Rents will increase 7% by the end of 2022, more than double the predicted year-over-year growth in home prices of 3%. Demand for rentals will be strong for several reasons. The end of mortgage forbearance will cause many homeowners to sell and rent instead. As the pandemic subsides, more people will choose to live in cities where it is more common to rent. Additionally, the strong labor market will cause more people to move to a new city, and many movers will want to rent so they can get to know their new city before they buy. Since vacancy rates are already at record lows, increased demand for rentals will almost certainly push rents to new heights.
Zillow: Large rentals will be in high demand. Rising home values will impact the rental market as well. After a slowdown in the early months of the pandemic, rent prices came roaring back, especially in what were previously some of the most affordable markets. As rising costs make it harder to save for a down payment, expect demand for larger rentals to increase, including for single-family homes, as families stay in the rental market longer.
Redfin: Homebuyers will relocate to affordable cities like Columbus, OH, Indianapolis and Harrisburg, PA over the Sun Belt.
In 2022, people will be less likely to move to Sun Belt cities that dominated the 2021 housing market. Austin, Atlanta and Phoenix have seen home prices increase by 29%, 24% and 35% respectively since the start of the pandemic, making them less attractive to homebuyers that prioritize affordability. Instead, cost-conscious homebuyers will seek out affordable northern cities like Columbus, OH, Harrisburg, PA and Indianapolis, which all happen to be capital cities with highly educated residents where the median home price is still less than $250,000. Columbus, Indianapolis, and Harrisburg have all seen the number of homebuyers moving in minus the number moving out more than double since last year. Meanwhile, Atlanta, Austin and Phoenix have seen a decline in net-migration since peaking in Q1 2021.
“Homebuyers tend to seek out Columbus for its central location and highly rated schools,” said Columbus Redfin agent Caitlin Mulroy. “And although our climate isn’t perfect, we haven’t had any major natural disasters. I recently helped someone move from Los Angeles to be close to family. He works remotely for a major Hollywood movie studio and is still working on Pacific Time.”
Zillow: The ‘Sun Belt surge’ will extend to secondary markets
2021 was in many ways the year of the Sun Belt. Zillow predicted Austin would be the hottest market of 2021 as part of a “Sun Belt surge,” which proved to be the case — no metro has seen home values grow more than Austin so far this year, and all of the top destinations for long-distance movers were in the Sun Belt.
Zillow predicts this surge will extend to smaller Sun Belt cities in 2022 as price hikes in this year’s star markets make more-affordable nearby markets more attractive. From April to August, Austin held the top spot in quarter-over-quarter home value growth, which is a good indicator of current housing demand. As of October, the smaller Florida metros of Fort Myers and Sarasota held the top spots, and 24 of the top 25 markets were in sunny states – a sign of things to come in 2022.
Redfin: People will vote with their feet, moving to places that align with their politics.
After the Supreme Court decides contentious cases related to abortion rights and gun rights, we will see more migration for political reasons. A recent Redfin survey confirms that a substantial share of homebuyers won’t move to a place where the laws conflict with their political beliefs. For example, 1 in 7 recent movers surveyed said they would refuse to live in a place where abortion is fully legal.
Zillow: Work will play a key role in moving decisions.
In 2022, hybrid and fully remote work will continue to reshape which areas are most in demand as the pandemic winds down and more workers receive permanent guidance on their flexible work options.
Zillow economists expect fully remote workers to continue to seek affordable markets, like those in the Sun Belt and other nontraditional housing hot spots where they can afford to buy their first home or trade up for a bigger one. And amid the “Great Resignation” and a generally aging population, traditional retirement markets are likely to see elevated demand.
Redfin: Condo demand will take off
In 2022, dense housing will make a comeback. More and more homebuyers are open to buying a condo or townhome for a fraction of the price of a single-family home. That’s a reversal from when the pandemic lockdowns motivated homebuyers to seek out larger homes with big backyards, which caused single family home prices to increase 27% from the start of the pandemic, while condo home prices only increased by 14%.
Zillow: More Gen Zers and millennials will buy a ‘second home’ before a primary residence.
Americans are taking advantage of remote work flexibility to move to larger homes in more-affordable markets, but many will not want to commit to a new location full-time. This is often true for younger people who are attracted to the amenities of living in a city, where expensive housing is more likely to put homeownership out of reach.
With these factors in play, there may be more people buying what’s traditionally a second home — either a part-time vacation home or an investment property — before they buy a home as a primary residence.
Redfin: Redfin Chief Economist Daryl Fairweather is the source for their 2022 housing predictions. Daryl Fairweather is the chief economist of Redfin. Prior to joining Redfin she was a senior economist at Amazon working on problems related to employee engagement and managing a team of analysts. During the housing crisis, Daryl worked as a researcher at the Boston Fed studying why homeowners entered foreclosure. Daryl received her Bachelor’s of Science from the Massachusetts Institute of Technology and received her Ph.D. and Master’s degrees in economics at the University of Chicago where she specialized in behavioral economics.
Zillow: Article written by Zillow research. Zillow Research is independent of Zillow’s business goals, and is not a revenue center. Zillow Research provides unbiased data and analysis about the housing market in a transparent way. Whenever possible, the team makes code and underlying data available so work can be replicated independently. Methodology is always clearly explained. Dr. Svenja Gudell is the chief economist of Zillow Group. Svenja currently serves on the Board of Directors for the National Association for Business Economics. Prior to joining Zillow Group, Svenja worked on economic, financial and strategic consulting for Analysis Group, and was an assistant economist in the research group of the Federal Reserve Bank of New York. Svenja has a bachelor’s degree in economics from the University of Rochester, a master’s degree in economics from New York University, a master’s degree in business administration from the University of Rochester, and a Ph.D. in finance from the University of Rochester.