Following two unprecedented and unpredictable years, some major unknowns loom over the housing market, including rising inflation.
The consumer price index rose 6.8% year-over-year in November – the greatest 12-month increase since 1982. Higher than expected inflation in 2022 could dampen the housing market outlook, and there are concerns about whether new construction can sustain its 2021 pace. Homebuilders face headwinds from supply chain disruptions, labor shortages, and expensive building materials. While homebuilder confidence and consumer demand remain high, single-family housing authorizations declined year over year for the first time since July 2020.
Affordability will likely be a key consideration in 2022, as the supply-demand imbalance puts upward pressure on home prices. As a result, many homeowners may choose to invest in their existing homes rather than re-enter the competitive housing market. In November, maintenance jumped after six straight months of slowed growth. This trend could continue into 2022, although the cost of maintenance and remodel projects is rising.
Looking ahead, we hope to see inflation flatten, which could provide a more balanced housing market in 2022.
Download the latest BuildFax Housing Health Report to understand the impact of mounting inflation on housing activity and what’s on the horizon.