Kiplinger's Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or for more information.
Annual house price growth is now in the single digits, for the first time since late 2020.
The surge in house prices during the COVID-19 pandemic sent home values well above the peak hit during the housing bubble that led to the Great Recession. Price gains, however, started to slow down in April. The S&P CoreLogic Case-Shiller National Home Price Index (opens in new tab) rose 9.2% in October from a year ago, down from 10.7% in the previous month. Mortgage financing has become more expensive as the Federal Reserve started hiking interest rates to bring inflation under control. With home affordability at its worst since the mid-1980s, credit conditions are set to continue to tighten in the coming months. House price growth likely slowed to 7% annually by the end of 2022.
Residential construction continued to weaken in November.
1.427 million annualized units, and are now down 32% since February when mortgage rates started to rise. Single-family starts fell 4.1%, while multifamily starts rose 4.9% for the month, bouncing back after two months of declines. Multi-family starts have been strong in 2022 amid low apartment vacancy rates. Total housing permits, which lead starts by a month or so, plummeted 11.2%. Single-family permits fell for the ninth month in a row. Much of the weakness in building permits and starts in 2022 was concentrated in single-family units, as builders shelved plans to break ground on new projects amid soaring mortgage rates and elevated business spending on building materials. Single-family units currently under construction declined for the sixth consecutive month.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
New home sales likely fell around 16% in 2022.
Sales rose 5.8% in November to a seasonally adjusted annual rate of 640,000 units. New home sales are down 15.3% over the past year. The inventory of new homes fell in November, but it is up 18.2% from a year ago. Sales were mixed at the regional level, with the overall increase driven by gains in the West and the Midwest.
Existing home sales have further to fall and were likely down 15% in 2022.
Sales of previously owned homes fell 7.7% in November. Existing-home sales have fallen every month since February and are down more than 35.4% from a year ago. The run-up in mortgage rates has chilled buying activity, and increased economic uncertainty appears to be holding back both home buyers and sellers. A gradual improvement in affordability as house prices fall and mortgage rates decline should allow existing-home sales to recover by the end of 2023.
Related content
-
-
Want to Increase Income? Focusing on 5 Elements Can Help
There are multiple ways to generate income, but to make your money work for you, consider sustainability, maximizing, automation, reinvestment and tax efficiency.
-
Are Annuities Good Investments? Weighing the Pros and Cons
Love ’em or loathe ’em, annuities can be a smart investment tool for the right person under the right circumstances.
-
Kiplinger's Retail Outlook: Sales on a Downtrend
Economic Forecasts Weakening retail sales and high inventories point to further cuts in production.
-
Kiplinger's Jobs Outlook: Market Shows More Slowing Signs
Economic Forecasts The labor market is still strong, but early signs of weakening are emerging.
-
Kiplinger's Interest Rates Outlook: Long-Term Rates to Stay Soft
Economic Forecasts Signs of a slowing economy and easing inflation are key to the rates outlook.
-
The Most Expensive Natural Disasters in U.S. History
Economic Forecasts Wind, water, fire and drought have all wreaked havoc on the United States. What’s been the worst?
-
PODCAST: Is a Recession Coming?
Smart Buying With a lot of recession talk out there, we might just talk ourselves into one. We take that risk with Jim Patterson of The Kiplinger Letter. Also, dollar stores: deal or no deal?
-
Homebuilder Stocks Get a Pandemic Boost
Becoming an Investor As COVID shifts to an endemic, housing stocks could get a lift should Americans move to homes with more space and amenities.
-
Stick With Your Plan
Financial Planning Timing the market is nearly impossible. The worst thing you can do is sell stocks when prices are tumbling.
-
There's No Vaccine Against Inflation
Economic Forecasts Prices should ease in 2022, but inflation will remain above the levels of recent years.
