Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Economy Expands at Stronger Pace of 6.9% in Fourth Quarter of 2021

The economy (gross domestic production) expanded at a stronger annualized1 pace of 6.9% in the fourth quarter. Today's GDP number is a crucial indicator that shows the economy is on a path towards full employment. It is an important data point for the Federal Reserve to continue its plan to clamp down on inflation (which has hit 7%) and raises the likelihood that the Federal Open Market Committee will start raising the federal funds rate in March, which means higher mortgage rates ahead in 2022 and through 2023.

Consumers spending strengthened (+3.3%), especially on pandemic-related spending such as recreational goods, recreational services, transportation services, gasoline, and food services and accommodation. Consumers spent more on leisure and travel possibly due to the progress on vaccinations and adherence to protocols that make travel, dining, and engaging in other social engagements safer (e.g., masking, social distancing).    

Investment spending rose heftily (+32%), also driven by pandemic-related spending for equipment and intellectual property rights, as businesses and households invested in equipment, computers, and software that support the shift towards a hybrid work-from-home workstyle and creating healthier office environments.  

However, investments in non-residential structures declined 11.4%, a stronger decline than in the prior quarter, in part because the office sector continues to grapple with negative absorption and a high vacancy rate of about 12%. Investments in residential structures also declined 0.8%. This decline in residential investment has been the driver of the surge in home prices. NAR recently reported that in December, prices rose 15.8% year-over-year.

2022 Housing Outlook

With at least three rate hikes likely, NAR forecasts that by the end of the year, the 30-year fixed mortgage rate will hit nearly 4%. With higher mortgage rates, homes sales are likely to ease down to slightly below 6 million. With some slowdown in demand due to higher mortgage rates, home prices are expected to appreciate around 5%.

REALTORS® should expect some market slowdown, but it will be a healthier market with prices growing at a pace in line with inflation, which will make a home purchase more affordable for homebuyers.

1 Annualized growth rate if the economy were to continue expanding at the rate it did from 2021 Q3 to 2021 Q4.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.