“The rise in US house prices will slow to half its double-digit rate next year but still outstrip increases in consumer prices and wages, affordability would worsen over the next two to three years,” per the latest poll of property analysts from Reuters.
“Often viewed as the bedrock of financial wellbeing and consumer confidence, the U.S. housing market has not only weathered the pandemic-induced economic slowdown, it has outperformed the broader economy,” adds Reuters.
The S&P Case-Shiller index of 20 metropolitan areas has risen at a double-digit rate over the past 10 months, a pace the Nov. 17-Dec.6 polls of over 25 property analysts said would continue for the rest of the year to average at 16.8%.
That was expected to drop to 8.0% in 2022, according to the poll. Forecasts were in a 3-15% range.
Underscoring the strong demand for housing, U.S. existing home sales, which make up about 90% of U.S. home sales, were forecast to average at an over six million unit annualized rate until end 2022 at least.
However, higher consumer inflation and the U.S. Federal Reserve's recent overtures to tighten monetary policy earlier than expected are likely to rein in the pace at which prices have risen over the past year.
A lack of new supply, which has squeezed many new home buyers out of the market, will also remain a major challenge next year. Inventory levels are only about one-third of what is considered healthy.
When asked what will have the biggest impact on the U.S. housing market next year, all but one of the 27 analysts who answered an additional question chose either supply constraints (14) or higher interest rates (12).
Read: Weekly Column: How not to fight inflation – raise home building costs
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