We are currently experiencing one of the priciest housing markets in history, resulting in homebuyers taking out higher and higher loan amounts on their home mortgage. Currently, the average loan size on a borrower purchasing a home is a record $453,000. This is due to strong buyer demand that continues to push home prices higher and higher, while lack of inventory still faces the challenge to meet that demand directly.
As a result of this demand, Zillow has recently revamped its already robust expectations for home price increases in 2022. Zillow now expects a 21.3% year-over-year rate of home price growth to peak in May, while closing out the year with a 17.3% year-over-year increase in December. Again, the driving force behind Zillow’s revamped expectations is the lack of inventory. To keep things in perspective, in January 2021, the number of homes for sale was 26% lower than the level hit in January 2020. In January 2022, the number of homes for sale was 42% lower than in January 2020.
On a positive note, not all analysts agree with the high price increase expectations of Zillow. CoreLogic foresees home prices climbing just 3.5%, while Fannie Mae is predicting a 7.6% increase this year. What they all do agree on, however, is that inventory and mortgage rates are the key deciding factors in buyer demand, thus resulting in the rate of home price appreciation.
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By: Jon Iacono