Housing Market 2022: Structural Collapse or Foundational Gains?

Like most Americans, I'm invested in the housing market. As a homeowner, as someone looking to buy a house, and as an investor with housing stocks in my portfolio, I have a vested interest. Like most Americans, I'm invested in the housing market. As a homeowner, as someone looking to buy a house, and as an investor with housing stocks in my portfolio, I have a vested interest. [Outsider Club logo] Housing Market 2022: Structural Collapse or Foundational Gains? [Jason Simpkins Photo] By [Jason Simpkins]( Written Dec 24, 2021 Like most Americans, I'm invested in the housing market. As a homeowner, as someone looking to buy a house, and as an investor with housing stocks in my portfolio, I have a vested interest. And in that context, 2021 was a wild year for me, as home prices soared an astonishing 20% over the course of the year. That's an exceptional move for the market — registering roughly 4–5 times the average annual increase of 4.6%. The swell was driven mostly by younger homebuyers who are filing into a horribly undersupplied market. And unfortunately for many, that trend is going to continue, as housing inventory remains historically low. Indeed, "the seasonally adjusted number of homes for sale fell 18% year over year in November to an all-time low," according to a new report from Redfin. "This sent the median sale price up 15%, to $383,100," which "marked the 16th consecutive month of double-digit price gains." December is likely to be the 17th, since Redfin also said the median home sale price as of December 12 was up 14% from a year ago, to $359,750, just below the all-time high from late November. Still, there have been some signs of moderation... "The housing market became less competitive in November than it was in prior months as homes spent longer on the market and were less likely to sell above list price," said the Redfin report. "The typical home that sold in November went under contract in 22 days... up seven days from the record low of 15 days in June." New Robot Has Tech Execs Scrambling You might not believe this is even real, but I assure you this video has been left unedited. Nearly every tech company in the world is scrambling to get its hands on this tech. And investors are set to profit handsomely. Get the details on [our Top 3 Stocks Picks here.]( And just 44% of homes sold above list price for the month, down from a record 56% in June. "The average sale-to-list price ratio also dipped slightly in November, to 100.6%, down from a record high of 102.6% in June." Now, with the Fed tapering its bond purchases and raising rates, we'll likely see things cool down even further next year. Remember, the Fed has been pumping $40 billion per month into mortgage-backed securities, adding $567 billion total to its balance sheet in the process. But at its December meeting the FOMC announced it'd accelerate its withdrawal from the bond market. Whereas the Fed began tapering in November by cutting its mortgage purchases by $5 billion, it now aims to cut purchases by $10 billion. So it's effectively doubled the pace of the drawdown. What does that mean, exactly? It means that in general there's going to be a lot less demand for mortgage-backed debt. And when demand for bonds sinks, interest rates rise. Immediately following the Fed's announcement, the annual percentage rate (APR) on 30-year fixed-rate mortgages edged up to 3.12% from 3.1% the week prior and 2.67% last year. Indeed, mortgage rates were already on their way up prior to the Fed acting, simply as [a result of inflationary pressure](. In 2022, they'll likely approach, or even surpass, 4%. That could be enough to dampen demand, but it's unlikely to obliterate it. 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[Click here now to get the inside story.]( Fannie Mae and Freddie Mac expect to see U.S. home price growth of 7.9% and 7%, respectively, while forecast models released by Redfin and CoreLogic predict that 12-month price growth will fall to 3% and 1.9%. However, Goldman Sachs doesn’t see things cooling off quite so much. It’s forecasting a 16% jump. And only one model out there anticipates a price drop. It comes courtesy of the Mortgage Bankers Association, which believes the median price of existing homes will drop 2.5% between the fourth quarter of 2021 and Q4 2022. In defense of the MBA, I'll say such a scenario is certainly plausible. By any historic measure, home prices are exorbitant right now. Many buyers are already being priced out of their desired homes, and higher rates could alienate even more of the market. Furthermore, it's not just home prices that are rising these days. Prices are up across the board — including prices for everyday necessities like food and energy. That's a trend that's going to continue into the new year as well. Frankly, it's going to be hard for families, and especially young families, to upscale their homes when their pocketbooks are already being drained. Finances are going to tighten for a lot of Americans this year. So it's not hard to imagine the red-hot housing market hitting a speed bump. It's just that right now, there's still enough demand to support high home prices, and interest rates, while marginally higher, are still historically low. That's why the overwhelming majority of analysts remain bullish, and rightfully so. Fight on, [Jason Simpkins Signature] Jason Simpkins [follow basic]([@OCSimpkins on Twitter]( Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's [page](. *Follow Outsider Club on [Facebook]( and [Twitter](. 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