Low competition. 5 predictions for the housing market in 2022, from economists and real estate professionals

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We’ve already seen a price hike in the early months of 2022, and some professionals say that will continue.

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Aspiring homebuyers may have seen mortgage rates rise in recent months (although those rates are still close to historical lows – look at the lowest rates you might qualify for here), as have home prices. And all of this begs the question: What will happen to the housing market in 2022? MarketWatch’s Choices researched the latest forecast and asked professionals to share their thoughts.

First prediction: Mortgage interest rates will rise

We’ve already seen a price hike in the early months of 2022, and some professionals say that will continue. The Mortgage Bankers Association expects 30-year fixed-rate mortgage rates to reach 4.5% by the end of 2022, up from its 4.3% forecast the previous month, according to mortgage reports. “Mortgage rates will go up and down in 2022, and I wouldn’t be surprised if they finished the year at 4.5% or higher,” says Holden Lewis, Nerdwallet real estate and mortgage expert. Dr. Lawrence Yun, chief economist at the National Association of Realtors, expects rates to be around 4% for most of the year.

Prediction 2: Expect less intense competition

If you’re in the market for a home, keep in mind: Some experts I spoke with MarketWatch Picks say this year could mean less competition. In fact, Yoon expects less intense competition in the housing market in 2022. “The combination of higher interest rates and higher home prices will push some potential buyers out of the market, which could lead to reduced competition after the summer,” says Lewis. “.

Prediction 3: Home price rise will slow down

But how slow it will go is up for debate (and to be fair, most pros expect a spike). Recently released research from Zillow shows that annual home value growth is expected to accelerate during the spring, peaking at 21.6% in May before slowing to 17.3% in January 2023. Fannie Mae says home prices will rise 11.2% throughout this year , followed by a more modest increase in 2023. But the National Association of Realtors, which polled more than 20 leading economists and housing experts, expects home prices to rise 5.7% through the end of 2022

Bill Dallas, president of Mortgage America, says he believes we will continue to see the highest levels of home price increases in rural and suburban markets where individuals can benefit from a stronger and vibrant economy. “Given some of the economic headwinds that we see on the horizon, I think home price hikes will return to normal in 2022 and home price growth will begin to track inflation more closely,” Dallas says.

Another thing to consider: higher interest rates will force buyers to shop in lower price ranges so they can afford the monthly payments. “Affordability issues will slow home price growth to less than 10% this year,” Lewis says. “With the Fed using the leverage of its policy to push mortgage rates higher, look for home prices to rise more slowly as buyers are forced to shop in lower price ranges,” says Lewis.

Prediction 4: Expensive homes will be easier to get

According to Yun and data from the National Association of Realtors, homes with $500,000 and under are disappearing quickly, while supply has risen at higher prices. “There are more listings on the upper end, homes over $500,000, than last year, which should lead to less hasty decisions by some buyers,” Yoon says.

Prediction 5: Foreclosures will rise

With mortgage tolerance programs nearing their end, experts say the truth is that some people won’t be able to make their payments, especially if they are out of work. “So, there will be some rise in foreclosures,” Yoon says.

Millions of people have gotten into mortgages during the pandemic, and those who stay put into 2022 are more likely to suffer lasting financial hardship. “When their predecessors are finished, they are less likely to be able to resume their payments, and they are more likely to end up in foreclosure,” Lewis says.

Yun notes that the devastation of the coronavirus will undoubtedly continue to contribute to changes in the market. “The terrible COVID death toll will require housing adjustments, such as downsizing widows and property sales.”

The tips, recommendations, or ratings in this article are those of MarketWatch Picks, and have not been reviewed or approved by our trading partners.

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