2022 – Let’s Check The Crystal Ball

• Zillow abandoned their iBuying house-flipping program
• Top Expert Predictions For 2022
• Real Changes For 2022

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Kidding aside. We don’t have a crystal ball. – However, that does not stop professional pundits from confidently claiming to be experts in predicting the future.

Before we get to their predictions, let’s recap what Zillow has been up to lately…

Zillow Abandoned Their iBuying House Flipping Program

For years, Zillow has been fooling the public by pretending that they are the experts in zestimating property values. Hypnotized homeowners have been falling for it because confirmation bias and dopamine rush are powerful forces that distort clarity of thinking.

Who can argue against feel-good measures that seemingly confirm that your property is worth a whole lotta moola?

It turns out that Zillow themselves became a victim of their hubris. Zillow’s proprietary algorisms that establish property values left them hanging dry.

With their ambitious iBuying program Zillow tried to act as market makers profiting from the buy/sell spread of flipping houses. Instead, they ended up with homes that weren’t worth what they paid for. – Oops.

Zillow announced the termination of their iBuying program, full stop. Reportedly they let go 25% of their workforce. After the announcement, Zillow’s stock price dropped 50% in three weeks since its peak on 10.29.21.

“When you combine ignorance and leverage, you get some pretty interesting results.” – Warren Buffett

Who would have thought that Zillow is unable to accurately predict home values and price trends?

On 11.2.2021, Rich Barton, Zillow’s CEO admitted: “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated.”

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Top Expert Predictions For 2022 

Only a week after Zillow admitted that they can’t predict the future, they are at it again.

They must be convinced that we have a memory of a goldfish. Indeed, most of us do forget the lack of credibility of previous projections. But we humans are suckers for the perception of certainty, even though there is none.

See related article:  COVID-19 – Hawaii Real Estate

Our brains constantly scan to recognize patterns with which we attempt to construct a picture of the future. Any prediction is better than none. It creates a sense of security, although a false one based on rubbish data and unknowable circumstances. Astrology still maintains its allure among the many gullibles.  

“We accept the reality of the world with which we are presented, it’s as simple as that.” ~ Christof, the fictional creator of The Truman Show explaining why Truman has never come close to discovering the true nature of his world.

Experts delight in pretending they have some insight edge. But credentialed authorities are comically lousy at predicting the future. And the more they know the more they are prone to be utterly wrong. That’s why expert hedge fund managers can’t outperform the market in the long run. Luck is a far greater predictor than skill.

We won’t leave you hanging any longer to get your latest fix on expert predictions. – For benchmark reference, the largest U.S home price increase over any 12 months was a record 19.9% between Aug. 2020 and Aug. 2021. And 30-year fixed mortgages rates are currently at 2.96%. 

Here is what the future will bring for U.S. home prices, according to…

– Goldman Sachs

On 10.11.2021, investment bank Goldman Sachs’ prediction sees U.S. home prices climbing 16% by the end of 2022.

– Zillow

On 11.17.2021, Zillow’s most recent prediction sees U.S. home prices climbing 13.6% between Oct. 2021 and Oct. 2022. That’s a revision to Zillow’s Sept forecast which predicted U.S. home prices would climb 11.7%.

– Fannie Mae

On 11.10.2021, Fannie Mae’s most recent Nov 2021 prediction sees U.S home prices climbing 7.4% in 2022 and another 2.9% in 2023. Fannie Mae predicts mortgage rates to average 3.3% during 2022 and climb to 3.5% in 2023.

Fannie Mae predicts the final quarter of 2021 to show a 16.6% Yr/Yr increase in U.S. home prices compared with the record high of 18.2% Yr/Yr in the quarter that ended Sept. 2021.

“The cooldown has started, but it will take time for the market to normalize. Double-digit home-price inflation will last until the middle of 2022, according to the forecast. It won’t be until 2023 when home inflation returns to the 5% pace seen before the pandemic.”  (US Home Price, Inflation Outlook: Fannie Mae Sees Increases Until 2023)

– Redfin

On 11.18.2021, Redfin announced there will be 1% more home sales in 2022 than in 2021, and U.S. home price growth will slow to 3% Yr/Yr by the end of 2022. 30-year fixed mortgage rates will climb to 3.6% by end of 2022.

– National Association Of Realtors – Lawrence Yun

On 11.13.2021, the National Association Of Realtors’ economist Lawrence Yun stated, “there are signs that a more normal and predictable market is on the horizon. Home prices will continue to rise but at a slower pace.” “The days of fast price gains are over. Sellers should expect much less than what was occurring the past 12 months. Home prices generally will be higher compared to one year ago, but maybe a bit lower compared to what occurred in the summer.”

Yun projects 30-year fixed mortgage rates to climb to 3.5% in mid-2022 and 3.7% by the end of 2022. 

– Mortgage Bankers Association

On 11.22.2021, the Mortgage Banker Association’s latest forecast projects U.S. home prices to grow 5.1% Yr/Yr by end of 2022, 4.1% Yr/Yr by end of 2023, and 5.4% Yr/Yr by end of 2024.

They predict 30-year fixed mortgage rates at 3.7% by the third quarter of 2022, 4% by the end of 2022, 4.3% by the end of 2023, and 4.3% by the end of 2024.

MBA’s ability to predict this far into the future must be evidence that they have indeed the finest crystal ball of all. Or, they just revise frequently and want to sell you a subscription to their infinite continously changing wisdom.

– Core Logic

On 11.2.2021, the CoreLogic HPI forecast predicts that U.S. home prices will increase by 1.9% Yr/Yr from Sept 2021 to Sept 2022. That would equal the slowest 12-month period for U.S. home price growth since 2012.

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There you have it. The range for U.S. home price appreciation is between +16% and +1.9% by the end of 2022.

Pick your favorite forecast, believe its accuracy, and pretend that uncertainty has been removed. Good luck.

In his book, The Black Swan, the author Nassim Taleb explains several problems with predictions, including underestimating the margin of error, recency bias, confirmation bias, and forecast degradation which over time quickly goes exponential.

And of course, the occasional unforeseen Black Swan event. – Delta? Omicron..?

Just ask the well-fed turkey that was convinced he was king of the farm until the day before Thanksgiving when the farmer sharpened the knife.

Here is a sample past prediction from 6.2.2020 by Core Logic, which at the time projected an imminent decline in U.S. property values: Home Prices Holding Steady Despite Initial Concerns: CoreLogic Reports Home Price Acceleration Continued in April, but a Decline is Looming

Naval Ravikant said it best:

“There Are No Adults’ Everyone’s making it up as they go along. Figure it out yourself, and do it.” ~ Naval Ravikant

Since we are poking fun at predictions, some observations unrelated to real estate…

• Here is an anecdotal approach to taking things in stride: Two Things That Are Both True.
• And another pundits’ favorite hot topic, stock market valuations: The Shocking Truth About Today’s P/E Ratios

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Enough Of Predictions

You probably check our Blog not just for kicks and giggles. Instead, here is some actionable advice for Hawaii real estate: Don’t try to time the market.

It’s time in the market, not timing the market.

We said it before, the right time to buy is…

• When you are committed to living in the same neighborhood, and
• When you found a suitable home that you can afford.

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Hawaii – Real Changes For 2022

Something tangible that could get you more house for your money, here are Hawaii’s new 2022 conforming loan limits:

• $937,507 – single-unit dwelling
• $1,200,420 – two-unit dwelling
• $1,450,935 – three-unit dwelling
• $1,803,195 – four-unit dwelling

Bill 41?

Honolulu’s Department of Planning and Permitting, City Council, and the mayor are currently pushing forward with a devious sleight of hand to monopolize condotel property management: Bill 41 – Oahu Short-Term Rental Rule Amendment. 

City Council is expected to continue deliberating in March 2022.

The probability of outcome and the impact on the economy are unknowable at this time. Check back soon for updates and how it affects the Hawaii real estate market.

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— We don’t just write about this stuff. We are expert realtors specializing in representing buyers and sellers of real estate in any market condition. We are committed to providing the most excellent service available on the planet. We love what we do and look forward to assisting you too!

Contact us when you are serious and ready. We are here to help.  

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