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Over the past couple of years, home prices soared, giving homeowners a great opportunity to increase their home equity. Sellers who choose to sell their homes can also realize significant profits thanks to rapid price appreciation.
While home prices soared in 2021, what are they expected to do in 2022? Will we see the same level of price increases over the next few months?
Home prices across the US have seen dramatic increases in value over the past couple of years, and particularly in the last 12 months. While the recent health crisis may have significantly impacted most other industries, it doesn’t seem to have much negative effect on the real estate industry. Instead, this sector has seen above-average gains over the recent past.
According to Zillow, home prices across the US increased 19.2% over the course of 2021, and over 26% since the beginning of 2020 just as the pandemic began. As of this writing, the national average price for a home is $312,728. Zillow also predicts healthy gains next year as well, though perhaps not as strong as price appreciations we’ve seen throughout 2021.
On a quarterly basis, home price appreciation reached its highest level ever, according to the FHFA’s Division of Research and Statistics. Home prices increased in every state, in Washington DC, and in all of the top 100 largest metro areas between Q3 of 2020 and 2021.
Leading the pack was Idaho, with a year-over-year price appreciation of 35.8%. Boise City, Idaho, saw price increases of 37%.
This healthy growth in home prices was largely stimulated by low mortgage interest rates, tight inventory, and an improving economy. Having said that, the affordability issue could slow demand, which can subsequently slow the rate of price increases going forward.
According to CoreLogic’s Home Price Index (HPI), home price increases accelerated for all home price points to the highest rates since CoreLogic started measuring these metrics back in 1976. The following chart displays the rates of increase year-over-year from July 2020 to July 2021:
| Price Tier | Rate of Increase |
| Lowest price tier | 22.1% |
| Low- to middle-price tier | 20% |
| Middle- to moderate-price tier | 19.9% |
| High-price tier | 19.1% |
Perhaps unsurprisingly, home price appreciation was highest in the lower-priced tier, given the higher affordability in this price range. Having said that, the gap in rates of appreciation among all four tiers is closing, which suggests that inventory is very tight at all price points.
Right now, there is only a 2.4-month supply of existing homes available for sale to meet current demand. That’s far below a balanced market, which is characterized by a 5- to 6-month supply.
CoreLogic’s HPI also distinguishes home price appreciation among detached and attached properties:
| Type of Home | Rate of Increase |
| Detached properties | 19.7% |
| Attached properties | 11.6% |
Based on the chart above, the rate of home price increases in detached properties was nearly double that of attached homes. This could be due to the higher demand for more space and lower density communities following the recent health crisis.
While every state has seen healthy gains in home prices over the past year, certain markets have been particularly hot over the course of 2021. Here are the top 10 zip codes with the hottest appreciation rates across the nation based on median price per square foot from September 2020 to September 2021:
| Zip Code | Rate of Increase (price per square foot) |
| 37862 Sevierville, TN | 85% |
| 34134 Bonita Springs, FL | 66% |
| 33957 Sanibel, FL | 65% |
| 96761 Lahaina, HI | 64% |
| 36542 Gulf Shores, AL | 60% |
| 92325 Crestline, CA | 60% |
| 37205 Nashville, TN | 58% |
| 37876 Sevierville, TN | 55% |
| 33950 Punta Gorda, FL | 51% |
| 32250 Jacksonville Beach, FL | 49% |
Data from the above chart shows that Tennessee and Florida have the fastest home price appreciation zip codes. Perhaps the temperate climates that attract vacationers have a lot to do with this trend.
Both homeowners and buyers alike have a vested interest in how much home prices have increased over the past year.
Homeowners will want to know how much their homes are worth and the amount of equity they’ve managed to build up, and anyone looking to sell will want to have a clear idea of how much they can expect to fetch.
Buyers will want to understand how much homes are currently selling for in the areas they’re interested in to determine what they will be spending on a home purchase.
Regardless of the circumstances, it’s helpful to know how to calculate home price appreciation. Fortunately, it’s relatively easy to do. Simply divide the change in the value by the original cost and multiply by 100 to arrive at a percentage.
To illustrate, let’s say your home was originally worth $300,000 when you first bought it, and its current market value is $400,000. The calculations would be as follows:
Based on these figures, your home appreciated in price by 33% since it was first purchased.
If the thought of juggling a bunch of numbers seems daunting to you, there are handy house price calculators available online that allow you to simply plug in the appropriate figures, and the calculator will do all the complex stuff for you. Give the Federal Housing Finance Agency’s (FHFA) House Price Calculator a try.
The above number provides you with an idea of how much your home has increased in value since you first bought it, but what about future price growth?
The following factors will have an effect in the value of your home in the future:
Making improvements. Upgrading your home adds instant value and equity to your home. Just be careful to choose the right projects and not to spend too much on renovations to ensure a high ROI.
Increasing square footage. Generally speaking, the larger a home is, the higher its value. If you add an addition — whether by adding a second storey to a bungalow or expanding the footprint of the home, for instance — you can effectively increase your home’s square footage and increase its overall value.
Maximizing energy efficiency. Homes that are cheaper to operate due to more energy-efficient systems and appliances can also increase in value.
According to Zillow, home prices across the nation are expected to increase by a rate of 13.6%. While that may not be as high as this year’s increase of 19.2%, it’s still a very healthy rate of increase.
To help you understand how much equity you can gain by purchasing a home today, let’s use Zillow’s current national home value of $312,728 and the anticipated rate of appreciation of 13.6%. If prices increase at this rate, your home would be valued at $355,259 by the same time next year. That’s a gain of $42,531.
Given this, anyone who gets into the market today can expect to realize significant gains over the course of 2022 and beyond.
Should you buy a home now? Yes, since it seems homes will continue to appreciate in 2022.
At Sammamish Mortgage, we can help you get fully preapproved for a mortgage, even in the face of massive home appreciation rates.
Sammamish Mortgage has been in business since 1992, and has assisted many homebuyers in the Pacific Northwest. If you are looking for mortgage financing in Washington State, we can help you get pre approved. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon, and Washington.
Contact a loan officer if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.