US home prices to rise another 16% in 2022

EditorialRoom 1st November 2021

Home prices in the U.S. are currently up 20% year-over-year but they have yet to peak, according to a new report from Goldman Sachs. The investment bank’s economists predict that home prices will grow another 16% by the end of 2022.

“Of all the shortages afflicting the U.S. economy, the housing shortage might last the longest,” the note goes on” wrote a Goldman Sachs team of economists led by Jan Hatzius in a recent note.

The COVID-19 crisis has driven many Americans to seek homes in suburban areas that provide more space and are not as congested as apartments in big cities. Over 15.9 million people have moved during the coronavirus, according to USPS data.

Yet many other homeowners have been reluctant to sell during the pandemic, and the construction of new homes has foundered amid supply chain disruptions, lumber shortages, and now economy-wide labor shortages.

Industry experts say the current home price boom emerged from a cocktail of low interest rates, booming demand and supply bottlenecks.

“The supply-demand picture that has been the basis for our call for a multi-year boom in home prices remains intact,” the note goes on. “Housing inventories remain historically tight.”

Goldman’s analysts say there is a solution to the national housing shortage which could help ease prices.

“Economic research shows that relaxing the zoning rules and other regulatory constraints that have impeded homebuilding for decades would boost supply and lower prices and rents. But in practice, this has been difficult politically,” the economists wrote.

Political wills have been at odds over efforts that would relax zoning rules and other regulatory constraints that have slowed homebuilding for decades, CNN reported. That’s in spite of economic research that shows such efforts would boost supply and lower home prices and rents, according to the Goldman Sachs report.