2022 Housing Market Predictions

While what we have seen in the housing market over the past two years is likely unsustainable, some experts still predict a rapid increase in prices in 2022. Very few experts were predicting a double digit price increase in 2022, but most have revised their projections upwards. Because of this, we will continue to see a struggle for first-time homebuyers and those looking to move from renting to owning. With home prices and mortgage rates on the rise, coupled with minimal supply, buyers are still in for a tough market experience. There are many ways around this that will allow you to have the best chance to buy a home, which we went over in our tips for first-time homebuyers. Here are the 2022 housing market predictions after the first quarter has ended.

2022 Housing Market Predictions For Prices

As we have seen in the past two years, the prices of homes are appreciating very rapidly. While most experts predicted a continuous rise of prices for up to five more years, very few saw this rapid of an increase in 2022. 2022 housing market predictions for price increases to start the year were as low as 2-3%. However, the market has remained strong and we have already seen prices increase by over 3% five months into the year. This has forced the hand of many experts and industry leaders to raise their pricing forecasts for 2022.

Coming into the year, real estate was expected to remain strong, but prices were expected to decelerate. However, we have seen the exact opposite. While prices will likely not increase 20% year over year like we just saw, there is very high odds of a double digit increase still. The average expected move in home prices in 2022 is as high as 9%. However, a few experts and industry leaders are expecting an increase of over 10%. This seems more likely, as some experts are expected to be skittish based on the uncertainty of the housing market.

Mortgage Rate Uncertainty

The biggest uncertainty in the housing market for 2022 is just where mortgage rates will end up, and how this will impact demand. As the Federal Reserve said on Wednesday, they are able to control the demand aspect of the market, but supply remains up for question. While the Federal Reserve rose interest rates by the most in 22 years, remember that they do not control mortgage rates. However, when the Federal Reserve does raise their interest rates, mortgage rates still respond accordingly. Seen as a leading indicator to see if what the Fed is doing is working, mortgage rates are increasing at the fastest rate ever.

This increase in mortgage rates is based on predictions for higher rates and less friendly monetary lending. With monetary policy looking to change dramatically over the course of the year, borrowing costs will be increased at a rapid pace. Experts started the year predicting that mortgage rates would only increase to the mid-3s and low 4s. However, mortgage rates have soared to well over 5%. Mortgage rates have reached their highest level since August 2009, just months before the Federal Reserve began cutting rates to stimulate the economy. Since mortgage rates are seen as a leading indicator in terms of the economy in this environment, how real estate reacts will give us an insight into the economy.

Home Sales Will Remain Elevated

One of the strongest aspects of the current real estate market is just how strong the home sales have been. Over the course of the pandemic, we have seen a record number of homes sold per year. Last year, sales of homes reached the highest level since 2005. This year, if supply is able to tick up or remain the same, we are expected to beat that number again. If we see the number of home sales increase again this year, it will be the largest increase on record. In the case that home sales remain strong even with higher mortgage rates and higher prices, we will be shown that the housing market will continue to drive the economy.

Many economists are predicting a slowdown in economic activity and growth due to the changing monetary policy. While this is needed to stamp out inflation we haven’t seen in 40 years, it will be detrimental to the economy. However, real estate continues to look like the one industry that can survive the rate shock and price increases. If we do ultimately see a slowdown in the economy, it will still likely take months to years to impact real estate. Remember, we are still near record low inventory, causing sellers to remain with the upper hand.