After almost two years of double-digit increases and multiple bids on everything from shanty homes to beach front mansions, many experts thought home price appreciation would decelerate or happen at a slower pace in the last quarter of 2021. However, the latest Home Price Insights Report from CoreLogic indicates while prices may have plateaued, appreciation has been like Charlie Sheen at an open bar; raging out of control. The following graph shows year-over-year appreciation throughout 2021. December data has not yet been released.

As the graph shows, appreciation has remained steady at around 18% over the last five months.

The latest S&P Case-Shiller Price Index and the FHFA Price Index show a slight deceleration from the same time last year – it’s just not at the level that was expected. However, they also both indicate there’s continued strong price growth throughout the country. FHFA reports all nine regions of the country still experienced double-digit appreciation. The Case-Shiller 20-City Index reveals all 20 metros had double-digit appreciation.

Why Haven’t We Seen the Deeper Deceleration Many Expected?

Experts had projected the supply of housing inventory would increase in the last half of 2021 and buyer demand would decrease, as it historically does later in the year. Since all pricing is subject to supply and demand, it seemed that appreciation would wane under those conditions. Or so conventional thinking would go…

Buyer demand, however, did not slow as much as expected, and the number of listings available for sale dropped instead of improved. The graph below uses data from realtor.com to show the number of available listings for sale each month, including the decline in listings at the end of the year.

Here are five reasons why the number of active listings didn’t increase as expected:

1. There hasn’t been a surge of foreclosures as the forbearance program comes to an end.

2. New construction slowed considerably because of supply chain challenges and continues to lag as everything from windows to cabinents have lead times longer than your every 5 yr visit to the DMV

3. Many believed more sellers would put their houses on the market once the concerns about the pandemic began to ease. However, those concerns have not yet disappeared. A recent article published by com explains:

“Before the omicron variant of COVID-19 appeared on the scene, the 2021 housing market was rebounding healthily from previous waves of the pandemic and turned downright bullish as the end of the year approached. . . . And then the new omicron strain hit in November, followed by a December dip in new listings. Was this sudden drop due to omicron, or just the typical holiday season lull?”

No one knows for sure, but it does seem possible.

4. ‘We’d Love to Sell, but where are we going to go?’. This sentiment permeates every prospective home seller from coast to coast. The only real answer is to another market to take advantage of equity gains or a part of your own town many would have considered ‘undesirable’ not that long ago as metro areas are rapidly expanding/improving.

5. The Money Printer continues humming along…

Bottom Line

Home price appreciation will likely slow (or decelerate) in 2022. However, based on supply and demand, you shouldn’t expect the deceleration to be swift or deep.

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What’s Going To Happen with Home Prices This Year?

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