Will Increasing Interest Rates Finally Slow Down the Housing Market in 2022? Veros Predicts Not Likely

SANTA ANA, Calif., April 7, 2022 —Today Veros® Real Estate Solutions, an industry leader in enterprise risk management and collateral valuation services, released its Q1 2022 VeroFORECASTSM that anticipates home prices will appreciate on average 7.1% for the next twelve months. VeroFORECAST evaluates home prices in over 330 of the nation’s largest housing markets. Veros is committed to the data science of predicting home value based on rigorous analysis of the fundamentals and interrelationships of numerous economic, housing, and geographic variables pertaining to home value.

Fundamentals remain to keep prices marching higher in most parts of the country. Historically low mortgage interest rates, insufficient new housing starts, very low inventory of homes for sale, the prevalence of all-cash buyers, and rapidly declining unemployment rates will continue to keep upward pressure on house prices. Though recent Fed actions have begun to raise interest rates and have started to paint a picture of rising mortgage rates throughout 2022, it is expected that these increases will be very modest and leave the historical low-rate environment generally intact. 

Though 30-year mortgage interest rates have gone from under 3.0% earlier this year to over 4.5% today, Veros doesn’t expect there to be much of an impact to the upward spiral of housing prices. Rates are still historically low, and with an average nationwide house price increase of $52,000 in 2021, many homeowners are sitting on a large amount of equity. When these homeowners are competing with others for purchase of a home where supply is very low, prices will be pushed upwards. In fact, recent interest rate increases will cause mortgage payments to increase by $200 per month for the median priced home. Buyers who have $52,000 more equity in their existing home are not likely yet to alter their behavior significantly for this monthly increase. To put this in perspective, this is the first time that typical house prices increased nationwide annually by more than the median full-time wage which was $50,000 last year. 

Eric Fox, Chief Economist at Veros commented that, “The situation the housing market is in today with prices that will not decrease or even slow down would be analogous to the situation of someone trying to lose weight but can’t seem to have success. If a nutritionist told them they had to start eating healthy meals, stop eating dessert, stop drinking alcohol, and start going to the gym 4 times per week to achieve their weight loss goals, and they questioned why they were not losing weight when the single recommendation they had only partially implemented was reducing their dessert from 4 scoops of ice cream per day to 3. That is the situation that today’s housing market is experiencing. We have a long way to go before fundamentals change in a significant way to cause a moderation in prices.”

The 10 strongest performing markets in the country forecast over the next 12 months continue to be exclusively in the Western United States or Florida, indicating demand being driven by migration South and West. Phoenix rocketed to the top spot with an estimated 17.2% forecast appreciation over the next 12 months. Flagstaff was another Arizona city making the Top 10. Utah remained strong with the cities of Provo and Salt Lake City making the list with appreciation above 14% expected. The Florida cities of Tampa and Sarasota are #8 and #9 with appreciation greater than 13% expected. And four states had a single city make the list including San Diego, Coeur d’Alene, Colorado Springs, and Olympia. 

The 10 Strongest-Performing Markets Over Next 12 Months

Rank Metropolitan Statistical Area (MSA) Forecast Q1 2022 - Q1 2023
1 PHOENIX-MESA-CHANDLER, AZ 17.2%
2 PROVO-OREM, UT 14.5%
3 SAN DIEGO-CHULA VISTA-CARLSBAD, CA 14.2%
4 SALT LAKE CITY, UT 14.2%
5 COEUR D'ALENE, ID 14.0%
6 COLORADO SPRINGS, CO 13.7%
7 FLAGSTAFF, AZ 13.6%
8 TAMPA-ST. PETERSBURG-CLEARWATER, FL 13.5%
9 NORTH PORT-SARASOTA-BRADENTON, FL 13.4%
10 OLYMPIA-LACEY-TUMWATER, WA 13.4%

The 10 least performing markets over the next 12 months are again led by Texas oil country city Odessa with 2.9% appreciation expected. Midland is another Texas oil market at #4 on this list with only 3.3% appreciation expected. Louisiana occupies 4 spots on the 10 least performing markets list, North Dakota 2 spots, and 1 spot each for Iowa and Illinois. Though these markets are on the 10 least performing markets list, all are expected to appreciate slightly.

The 10 Least-Performing Markets Over Next 12 Months

Rank Metropolitan Statistical Area (MSA) Forecast Q1 2022 - Q1 2023
1 ODESSA, TX 2.9%
2 WATERLOO-CEDAR FALLS, IA 3.1%
3 GRAND FORKS, ND-MN 3.3%
4 MIDLAND, TX 3.3%
5 HOUMA-THIBODAUX, LA 3.4%
6 BISMARCK, ND 3.5%
7 SHREVEPORT-BOSSIER CITY, LA 3.7%
8 PEORIA, IL 4.0%
9 LAKE CHARLES, LA 4.0%
10 ALEXANDRIA, LA 4.0%

VeroFORECAST Methodology

The quarterly VeroFORECAST reports to clients by subscription and to industry media in a summary overview. The current report is based on data from 335 Metropolitan Statistical Areas (MSAs), including 16,994 ZIP codes, 1025 counties, and 82% of US residents. The report is a projected increase 12-months forward.

Source: Veros Real Estate Solutions

This information is intended for use by the media for economic reporting and should only be used for physical or digital publication or broadcast, in whole or in part, must be sourced as coming from Veros Real Estate Solutions. The company name should appear with the first reference of the data. If the data are illustrated with maps, charts, graphs or other visual elements, the company name must be visible on the screen or website. For questions, analysis, interpretation of the data, or permission to reproduce, contact Brian Fluhr at BFluhr@veros.com.

About Eric Fox, VP of Statistical and Economic Modeling

Eric Fox received his M.S. in Statistics and B.S. in Mathematics and Economics from Purdue University, and has 30 years of industrial experience in statistical and econometric modeling, probabilistic life methodology development, statistical training, probabilistic design software development, and probabilistic financial/competitive analysis. Fox has published numerous technical papers on probabilistic and statistical methods.

About Veros Real Estate Solutions

A mortgage technology innovator since 2001, Veros is a proven leader in enterprise risk management and collateral valuation services. The firm combines the power of predictive technology, data analytics, and industry expertise to deliver advanced automated solutions that control risk and increase profits throughout the mortgage industry, from loan origination to servicing and securitization. Veros’ services include automated valuation, fraud and risk detection; portfolio analysis, forecasting, and next-generation collateral risk management platforms. Veros is the primary architect and technology provider of the GSEs’ Uniform Collateral Data Portal® (UCDP®). Veros also works closely with the FHA to support its Electronic Appraisal Delivery (EAD) portal. The company is also making the home buying process more efficient for our nation’s Veterans through its appraisal management work with the Department of Veterans Affairs. For more information, visit www.veros.com or call 866-458-3767.

Media Contact

Brian Fluhr
Vice President of Marketing
bfluhr@veros.com or communications@veros.com

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