Last year was one for the real estate historybooks. The pandemic helped usher in a buying frenzy that caused home prices tosoar nationwide by a record 19.9% between August 2020 and August 2021.

1 However, there were signs in the fourthquarter that the red-hot housing market was beginning to simmer down. In themonth of October, only 60.3% of sales involved a bidding war—down from a highof 74.5% in April.2 While this trend could be attributed to seasonality,it could also be a signal that the real estate run-up may have passed its peak. 

‍So what’s ahead for the U.S. housing market in2022? Here’s where industry experts predict the market is headed in the comingyear.

MORTGAGERATES WILL CREEP UP

Most economists expect to see mortgage ratesgradually rise this year after hitting record lows in late 2020 and early 2021.3

Freddie Mac forecasts the 30-year fixed-ratemortgage will average 3.5% in 2022, up from around 3% in 2021.4

The Mortgage Bankers Association predicts thatrates will tick up to 4% by the end of the year. "Mortgage lenders andborrowers should expect rising mortgage rates over the next year, as strongereconomic growth pushes Treasury yields higher," said Mike Fratantoni,chief economist for the Mortgage Bankers Association at their 2001 AnnualConvention & Expo in October.5

The Mortgage Bankers Association predicts thatrates will tick up to 4% by the end of the year. "Mortgage lenders andborrowers should expect rising mortgage rates over the next year, as strongereconomic growth pushes Treasury yields higher," said Mike Fratantoni,chief economist for the Mortgage Bankers Association at their 2001 AnnualConvention & Expo in October.5

What does it mean for you? Lowmortgage rates can reduce your monthly payment and make homeownership moreaffordable. Fortunately, there’s still time to lock in a historically-low rate.Whether you’re hoping to purchase a new home or refinance an existing mortgage,act soon before rates go up any further. We’d be happy to connect you with atrusted lending professional in our network.

THEMARKET WILL BECOME MORE BALANCED

In 2021, we experienced one of the mostcompetitive real estate markets ever. Fears about the virus and a shift toremote work triggered a huge uptick in demand. At the same time, many existinghomeowners delayed their plans to sell, and supply and labor shortages hinderednew construction.

This led to an extreme market imbalance thatbenefitted sellers and frustrated buyers. According to George Ratiu, directorof economic research at Realtor.com, “Prices and sellers reached for the moon[last] year. It looks like we are now about to move back to earth.”7
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What’s causing this change in market dynamics?The real estate market typically slows down in the fall and winter. Buteconomists also suspect a fundamental shift in supply and demand.

At the National Association of Realtors’annual conference last November, the group’s chief economist, Lawrence Yun,told attendees that he expects increased supply to come from an uptick in newconstruction—which is already underway—and an end to the mortgage forbearanceprogram. “With more housing inventory to hit the market, the intense multipleoffers will start to ease,” he said.8

Demand is also predicted to wane slightly inthe coming year. Rising mortgage rates and record-high prices have madehomeownership unaffordable for a growing number of Americans. And in a recentReuters poll, nearly 80% of property analysts said they expect housingaffordability to worsen over the next several years.9

What does it mean for you? Ifyou struggled to buy a home last year, there may be some relief on the horizon.Increased supply and softening demand could make it easier to finally securethe home of your dreams. If you’re a seller, it’s still a great time to cashout your big equity gains! And with more inventory on the market, you’ll havean easier time finding your next home. Reach out for a free consultation so wecan discuss your specific needs and goals.

HOMEPRICES LIKELY TO KEEP CLIMBING, BUT AT A SLOWER PACE

Nationally, home prices rose an estimated16.8% in 2021.8 But the average rate of appreciation is expected toslow down in 2022.

Nationally, home prices rose an estimated16.8% in 2021.8 But the average rate of appreciation is expected toslow down in 2022.

But what if you want to access the equity in your home while you’re still living in it? Maybe you want to finance a home renovation, consolidate debt, or pay for college. To do that, you will need to take out a loan using your home equity as collateral.

But experts disagree about how much moreproperty values can continue to climb this year. Goldman Sachs predicts thathome prices will rise by 13.5%, while Fannie Mae and Freddie Mac areforecasting a 7.9% and 7% rate of appreciation, respectively.2

 However, not all analysts are as bullish. TheNational Association of Realtors predicts a 2.8% rate of appreciation forexisting homes and 4.4% for new homes, while the Mortgage Bankers Associationexpects the average home price to decrease by 2.5% by the end of the year.10,2

 However, not all analysts are as bullish. TheNational Association of Realtors predicts a 2.8% rate of appreciation forexisting homes and 4.4% for new homes, while the Mortgage Bankers Associationexpects the average home price to decrease by 2.5% by the end of the year.10,2

What does it mean for you?If you’re a buyer who has been waiting on the sidelines for home prices todrop, you may be out of luck. Even if home prices dip slightly (and mosteconomists expect them to rise) any savings are likely to be offset by highermortgage rates. The good news is that decreased competition means more choiceand less likelihood of a bidding war. We can help you get the most for yourmoney in today’s market.

RENTSWILL CONTINUE TO RISE

Along with home, gasoline, and used vehicleprices, rent prices rose dramatically last year. According to CoreLogic, inSeptember, rents for single-family homes were up 10.2% nationally year overyear.11 And economists at Realtor.com expect them to climb another7.1% in 2022.12

“Homes are expensive now...but for mostpeople, the comparison that is most important is how that cost of homeownershipis going to compare to the cost of renting,” Zillow Senior Economist JeffTucker told CNBC in November.13

Tucker also pointed out that rent is lesspredictable than a mortgage—and more likely to go up along with inflation.13

Real assets, like real estate, are often usedas a hedge against inflation. That’s because property values typically risewith inflation.14 And when a homeowner takes out a mortgage, theylock in a set housing payment for the next 30 years.

In contrast, renters are at the mercy of themarket—and they don’t gain any of the benefits of homeownership, like taxdeductions, equity, or appreciation.

George Ratiu of Realtor.com told CNBC that headvises buyers to consider their budget and time frame. If they plan to stay inthe home for at least three to five years, he believes it often makes sense tobuy.13

Fortunately, it’s shaping up to be a betteryear for buyers. “I think 2022 has the promise of providing less competition, alot more homes to choose from, and, as a result, a lot more approachableprices,” Ratiu said.13

What does it mean for you? Bothproperty and rent prices are expected to continue rising. But when you purchasea home with a fixed-rate mortgage, you can rest assured knowing that yourmonthly mortgage payment will never go up. Whether you’re a first-timehomebuyer or a real estate investor, we can help you make the most of today’sreal estate market.

WE’REHERE TO GUIDE YOU

While national real estate numbers andpredictions can provide a “big picture” outlook for the year, real estate islocal. And as local market experts, we can guide you through the ins and outsof our market and the local issues that are likely to drive home values in yourparticular neighborhood.
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If you’re considering buying or selling a homein 2022, contact us now to schedule a free consultation. We’ll work with you todevelop an action plan to meet your real estate goals this year.‍