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The super-charged housing market of the past two years is expected to tick down a notch in 2022, but the same conditions that pushed home values and home sales to record highs in 2021 are likely to persist, making the coming year another tough year for buyers, according to an analysis by Zillow economists.

The economists predict that the current sellers’ market will continue into 2022, driven by the same factors that drove up home values by double-digit percentages in 2021: A tight supply of for-sale homes, plenty of millennial and baby boomer buyers competing for those homes, low mortgage rates, and a shift toward remote work that opens new possibilities for home shoppers.

Collectively, the market dynamics are likely to translate into bidding wars on many homes, especially during the traditional spring and summer shopping season when the market heats up.

Here are four real estate predictions to watch for in 2022.

1. 2022 home value growth will fall just short of record-breaking

Zillow’s forecast calls for an 11% increase in home values in 2022. That’s down from the 19.5% jump projected for 2021, but still among the strongest years since Zillow began tracking home values.

As of November 30, 2021, the typical U.S. home was valued at $316,368. An 11% increase would add another $34,800 to the price of a typical U.S. home.

Sales of existing homes are predicted to reach 6.35 million in 2022, the highest number in the past 14 years. In 2021, 6.12 million existing homes were estimated to change hands.

2. Sellers keep the upper hand

The past two years obliterated the usual seasonal patterns for sales. There were signs in the fall that we could return to the usual seasonal cooldown in the housing market. Data showed that fewer homes were selling above list price, homes were staying on the market a few days longer than they did during the summer, and more sellers were cutting their price. 

By late December, however, the autumn cooldown appeared to have run its course. Monthly price appreciation slowed, but barely. Inventory shrank, falling below 2019 levels.

All the evidence points toward this winter providing less of a break for buyers than many had hoped. Overall, the market is expected to cool slightly in 2022, but not enough to make it a buyers’ market.

3. ‘Sun Belt’ cities remain places of explosive price growth

Home prices in some of the larger Sun Belt cities — those located in the southernmost portion of the United States — saw explosive growth in 2021. As larger cities like Austin and Phoenix become less affordable, buyer demand is expected to push out to smaller Sun Belt cities, raising prices in those metros in 2022.

As of October 2021, 24 of the top 25 markets were in sunny states — a sign of things to come in 2022. 

Zillow economists expect fully remote workers to continue seeking 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. 

Traditional retirement markets also are likely to see elevated demand as a generally aging population seeks new living arrangements in retirement.

4. More Gen Zers and millennials will buy a ‘second home’ before a primary residence

With millions of Americans working from home and other remote locations, 2022 could see a new trend where the youngest buyers purchase a vacation or investment home before buying a primary home to live in full-time.

Younger people tend to favor urban areas with amenities, while recognizing that housing in those cities can be extremely expensive and often out of reach. As they explore remote work in more affordable places, they are becoming more willing to invest in a part-time vacation home or investment property to break into the market and start building equity while they explore their options.

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