4 Housing Market Expectations for 2022


With the real estate boom in full effect resulting from low mortgage rates and high demand for housing, 2021 was a year of opportunity for home sellers and their real estate agents. However, at the close of 2021, the national real estate market started to experience increasing mortgage rates and decreasing housing inventory. As we lead into 2022, what will this new year bring for the housing market? According to expert economists and analysts, four main changes will be occurring in the real estate industry.

Rising Mortgage Rates

Rising Mortgage Rates

Due to the increasing inflation rate, the National Association of Realtors (NAR) chief economist, Dr. Lawrence Yun, predicts that mortgage rates will rise in response to an increase in interest rates that are expected to help control inflation. While mortgage rates are currently held at an all-time low range of 2-3% for 15-year and 30-year rates, they are expected to increase to 3.5% by the end of 2022. Throughout 2022, the average rate is expected to remain a steady 3.3%, possibly spiking to 3.6% at the end of the year. Expert economists recommend home buyers and owners buy or refinance their homes early in 2022 if they are financially capable and want to avoid the climbing mortgage rates.

Rising Home Prices

Similar to 2021, the home prices in 2022 are predicted to continue rising; this year, however, the price increase will occur at a slower rate. Housing prices are predicted to increase between 2.9% to 5.7%, according to NAR and Realtor.com. Home prices are expected to fluctuate greatly depending on the specific location and market a home is within. According to Albert Lord, founder, and CEO of Lexerd Capital Management, the increase in prices is primarily due to the unmet demand for homes, however, the prices will increase at a slower rate in 2022 due to a heavy focus on the demand for affordable housing.

Slightly Less Competition

In 2021, the housing market experienced a severe shortage in inventory in combination with a large increase in demand. As 2022 approaches, experts predict that the strong demand for housing will remain, but inventory levels will gradually rise. As a result, fewer bidding wars are expected to take place. Higher home prices combined with higher mortgage rates are likely to force prospective buyers out of the market due to less affordability. However, there will remain more buyers than sellers, especially for those seeking homes in the $400,000 price point and below. Home and mortgage expert at NerdWallet, Kate Wood, believes that the hot housing market of 2021 will be slightly cooled in 2022 through increasing prices and lending rates.

Increasing Inventory

According to NAR, the current housing market is short by about five million homes, but will that shortage remain through 2022? The housing supply is expected to increase with the addition of many new construction homes on market throughout this year. Additionally, due to an increase in the number of homeowners and investors capitalizing on higher prices by deciding to sell their properties, the national inventory is expected to increase an average of 0.3% in 2022. However, low inventory is expected to remain a problem with homes continuing to enter and exit the market quickly.

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