A perfect storm. That's the best way to describe the red-hot housing market we've seen during the pandemic. It was spurred by a combination of low mortgage rates, remote work allowing buyers to be further away from their office, and a wave of first-time millennial homebuyers. Of course, years of under-building means there simply haven't been enough homes to meet this demand.. so cue the record price growth.

So how much longer will this run last? After all, home price appreciation of 19.9%—a 12-month record set between Aug. 2020 and Aug. 2021—can't be sustained forever.

 Already, there are signs the housing boom is losing some steam. This Fall, we finally saw some of the seasonal slowdown. That's not all: More homebuyers are finally pushing back against surging prices. In October, 60.3% of sales involved a bidding war, down from the all-time high in April (74.5%). There's also the increased likelihood the Federal Reserve will raise rates to tamp down inflation. Rising mortgage rates would price out some buyers altogether.

 What does this mean for home price growth in 2022? To find out, Fortune magazine reviewed seven industry forecast models. But buyers and sellers alike won't get much peace of mind from these forecasts: The economic models don't produce anything close to a consensus.

On the high end are Zillow and Goldman Sachs. Zillow projects home prices will rise 13.6% between Oct. 2021 and Oct. 2022. Meanwhile, Goldman Sachs forecasts a 16% uptick between Oct. 2021 and Dec. 2022. What's going on? Well, neither Zillow nor Goldman Sachs foresees the demographic wave of first-time millennial homebuyers letting up. According to their forecasts, there just won't be enough homes to satisfy all of that demand next year.

Since 1980, home prices on average have climbed 4.6% per year. Over the past year, price growth (19.9%) is four times that level.

 The good news for would-be home buyers? Among the seven forecast models, four predict we'll see price growth in 2022 fall back closer to the historical average. That includes Fannie Mae and Freddie Mac, which predict U.S. home price growth of 7.9% and 7%. That's slightly higher than norm, however, it's hardly the eye-popping numbers we've seen recently. Meanwhile, models released by Redfin and CoreLogic foresee 12-month price growth falling to 3% and 1.9%.

 What do the models predicting major price drop-off have in common? They expect price growth to be chopped down by rising mortgage rates. 

Now there is one outlook that expects a decline.

The Mortgage Bankers Association predicts the median price of existing homes will decrease by 2.5% between the fourth quarter of 2021 and the fourth quarter of 2022. When you look closely at its model, it's easy to see why: The Mortgage Bankers Association is forecasting that the average 30-year fixed mortgage rate will hit 4% by the end of 2022. 

That said, even if the Mortgage Bankers Association's price drop happens, it'd hardly be a housing crash. In fact, in that scenario, U.S. home prices would still be up over 20% from pre-pandemic levels.

Source: Lance Lambert/Fortune