Will My Home Value Decrease in 2022, if the Market Cools?

After a year of record-breaking home price growth in the United States, many homeowners are now wondering how long the “party” will last. A common question among concerned homeowners is:

Will my home value drop in 2022?

While there is no way to predict future real estate trends with complete accuracy, most forecasters and economists expect house prices in the U.S. to continue climbing in 2022.

In that scenario, most homeowners across the country would see their home values increase – rather than decrease – during 2022. And it’s a pretty likely scenario, based on current real estate trends.

At the same time, there are some housing markets where prices could level off or dip slightly over the next year or so. This is especially true in those red-hot housing markets where home values rose well into the double digits during 2021.

But again, much of this is speculative in nature. No one can say for sure if home values will decrease in 2022, or if they’ll keep climbing. The general consensus among economists (included below) is that they’ll increase next year, at least in most parts of the country.

Could Your Home Value Decrease in 2022?

For some homeowners in the U.S., the rapid and significant rise in home values for the past 18 months or so almost seems too good to be true. Many cities have seen double-digit price growth over the past year. In some of the hottest housing markets, like Austin, Texas, house values have risen by more than 30% in the past year.

These year-over-year gains are much higher than historical averages. And that has some homeowners concerned.

Many people now wonder if we are due for a “market correction” or a slowdown in price growth. They want to know if their home values will decrease in 2022, especially if the real estate market begins to cool down.

For many homeowners, these concerns are understandable — but possibly unwarranted. Most forecasters and housing market analysts expect home values in the U.S. to continue rising well into next year.

For example, the real estate data company Zillow recently predicted that U.S. home prices would rise by double digits over the next 12 months or so (extending into September 2022).

According to a September 2021 statement on the company’s website: “United States home values have gone up 16.7% over the past year and Zillow predicts they will rise 12.1% in the next year.”

The economic research team from Freddie Mac also predicted that house prices nationally would continue to increase in 2022. But they offered a more modest forecast, compared to the one issued by Zillow.

In the summer of 2021, Freddie Mac predicted that prices would rise by 12.1% in 2021, followed by a gain of 5.3% next year.

Clearly, these two groups don’t expect U.S. home values to decrease in 2022. Just bear in mind these are national forecasts, covering the country as a whole. At the local level (i.e., cities and metros), market conditions can vary greatly.

Price Reductions Becoming More Common Among Sellers

Getting back to the question at hand: Will home values in the U.S. decrease in 2022?

As stated above, there seems to be a general consensus that house prices in the U.S. will increase, rather than decrease, in calendar year 2022. But we are seeing signs that the market is starting to “soften” a bit.

In September, researchers from Realtor.com published a housing market update with data for the nation’s 50 largest metro areas. According to their report, more and more sellers are beginning to reduce their list prices in order to attract buyers.

This might be the result of a recent rise in real estate listings, nationally. With more inventory coming onto the market, it seems that some home sellers are feeling pressure to lower their prices.

According to Realtor.com chief economist Danielle Hale:

“This month, new sellers added more affordable entry-level homes to the market compared to last year, while others began adjusting listing prices to better compete with an uptick in inventory.”

Another relevant quote from their report:

“Additionally, the share of sellers who made listing price adjustments [reductions] grew 0.7% year-over-year to 17.3% of active inventory – the highest share in 21 months and closer to typical 2016-2019 levels.”

The Realtor.com report also showed the vast differences between individual real estate markets. For instance, the median listing price for homes in the Austin metro area rose by a whopping 36% year over year. In Milwaukee, on the other hand, the median list price dropped by -16.2% over the past year.

This data underscores the importance of conducting local housing market research. Real estate conditions can vary greatly from one city or metro area to the next. The same goes for home value trends.

The Most Likely Scenario

Given the meteoric rise of house prices over the past year and a half, it’s only natural to wonder: “Will my home’s value decrease in 2022?”

While no one can predict future real estate trends with complete accuracy, we can say this. Based on current conditions, it seems likely that home values in most U.S. cities will continue to increase in 2022.

At the same time, there will probably be some local housing markets where home values level off — or even decrease — in 2022. But even in those areas, a major decline in house prices seems unlikely. Most cities across the country are still experiencing supply shortages that tend to put upward pressure on home values.

Disclaimer: This article contains forecasts issued by third parties not associated with publisher. Such predictions are the equivalent of an educated guess. The publisher makes no claims or assertions about future housing trends.