This month a pair of bullish 2022 housing market outlooks dropped. First, Zillow’s latest forecast projected that home values will soar by 13.6% in the coming 12 months—revised upward from its 11.7% outlook published last month. Then, Goldman Sachs dropped a barn burner, predicting U.S. home prices will climb 16% between now and the end of 2022.
Let’s be clear: If these forecasts are right, we’ll be in for another crazy year in the housing market. That, of course, would be a big disappointment for stretched homebuyers who are hoping that the recent upticks in housing inventory meant the housing boom—which has seen home prices climb 22% since the onset of the pandemic—was nearing its conclusion.
But perhaps home shoppers shouldn’t lose hope. In its latest forecast, CoreLogic projects that home prices will rise just 2.2% in the next 12 months. Relative to Zillow’s and Goldman Sachs’s forecasts, the real estate research firm’s outlook is, well, fairly bearish.
For perspective, over the most recent 12-month window the S&P CoreLogic Case-Shiller Home Price Index has shot up a record 19.7%. So if prices were to rise only 2.2% over the next year, it would mark a serious cooling from recent conditions. With that level of price appreciation—coupled with some pay raises and smart financial decisions—homebuyers might actually catch up a bit.
Why is there such a wide range among 2022 housing forecast models?
As with most economic models, a lot of the variation boils down to assumptions. In particular, the outlook for mortgage rates. Now that elevated inflation (5.4% in September) looks like it’s going to stay for a while, the Federal Reserve is more likely to raise interest rates sooner rather than later. If it did, that would cause the average 30-year fixed mortgage rate, which is currently at 3.05%, to rise. Of course, rising mortgage rates would put negative pressure on the housing market. The sooner (and higher) mortgage rates rise, the lower price appreciation will be next year.
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This story was originally featured on Fortune.com