Morning Report: Zillow forecasts 11% home price appreciation next year

Vital Statistics:

  Last Change
S&P futures 4,603 35.2
Oil (WTI) 70.47 1.88
10 year government bond yield   1.46%
30 year fixed rate mortgage   3.28%

Stocks are up this morning on overseas strength. Bonds and MBS are down.

 

The number of loans in forbearance fell to 1.67% last week, according to the MBA. “More borrowers were current on their mortgage payments in November compared to October,” Walsh said. “This coincides with continued improvement in the labor market – faster wage growth and the unemployment rate dropping to 4.2 percent. While there was some deterioration in the performance of borrowers in post-forbearance workouts, four out of five overall remained current through November.”

 

Zillow is out with its 2022 forecast. While the housing market isn’t expected to match 2021’s torrid growth, the company still sees double digit home price appreciation next year. After rising 19.5% in 2021, home price appreciation is expected to decelerate to “only” 11%. Existing home sales are expected to rise to 6.35 million, which would be the best year since 2006.

Ultimately, supply will still lag behind demand. Given the wage gains we are seeing, any hit to affordability will be offset by rising earnings. Shortages of labor and materials will keep homebuilding from meeting the demand out there. Note Zillow sees a 1.35 million home shortage, which is much lower than NAR’s estimate of 5.5 – 6.5 million.

IMO, Zillow’s forecast of home price appreciation makes more sense than CoreLogic’s, which sees prices rising only 2.2%. Housing has historically outperformed inflation, and the supply / demand imbalance is the meta story here.

 

 

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