Investment banking giant predicts home prices will rise another 16% by the end of 2022

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There’s a reason buyers today still have a hard time buying a home. Home prices have climbed to almost unbelievable levels this year, putting buyers at a huge disadvantage.

In July, home prices rose 19.7% from the previous July, according to the S&P CoreLogic Case-Shiller Index. And an investment bank believes there is still room for growth.

House prices could rise further

Goldman Sachs has bad news for potential buyers. He expects house prices to continue rising, an additional 16% by the end of 2022.

Why is the increase continuing? It could come down to low inventory.

When there is not enough supply for a given item, prices can skyrocket. This is the case today in the housing market. Currently, there are not enough homes for sale to meet buyer demand. And inventories could easily remain sluggish until 2022, causing home prices to continue to rise.

One of the main reasons the home inventory is so limited is that many sellers have delayed listing their homes, possibly due to the pandemic and the general uncertainty it has caused. The pandemic appears far from over, and sadly, there is reason to believe that COVID-19 will be with us until 2022. In light of this, we may not see many more homes arriving on. market, especially early in the year, as listings tend to be slow during the non-pandemic winter months.

Are Low Mortgage Rates Helpful?

Home prices may be at all-time highs, but one bright spot is that mortgage rates are currently near their all-time low, where they have been for much of the year.

Homebuyers with good credit could get affordable home loans that can help offset rising home prices. Plus, mortgage rates are expected to stay low until 2022, so even if home prices continue to climb, buyers likely won’t be totally unlucky.

Yet there are risks involved in buying an ultra-high price home, and those risks go beyond the difficulty of meeting mortgage payments. Buyers who pay for their homes today risk losses if they have to sell those homes in the short term. And if the pandemic has taught us anything, it’s that circumstances can change overnight. This is why buyers today should proceed with caution, even if they can afford the homes they are paying too much for.

Once the housing supply catches up with buyer demand, home prices are expected to come down. But when that will happen is to be guessed.

In addition to rising house prices, Goldman Sachs also believes rental prices will continue to soar. Housing is already the most important monthly expense for the typical American. Unfortunately, in the short term, affording a home, whether it’s a purchase or a rental, could prove difficult until the residential real estate market cools down.


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