Many analysts projected home price appreciation would slow dramatically in the fall of 2021 and then continue to soften throughout 2022. So far, that hasn’t happened. The major price indices are all revealing ongoing double-digit price appreciation.
What Does This Mean for You?
Listed below are 2022 housing market predictions and how they could impact your decision to buy or sell.
Prediction 1: Mortgage interest rates will rise
We’ve already seen rates rise in the early months of 2022, and some pros say that will continue. The Mortgage Bankers Association predicts that rates on average 30–year fixed rate mortgages will hit 4.5% by the end of 2022, which is up from their 4.3% projection a month prior, according to The Mortgage Reports. “Mortgage rates will have their ups and downs in 2022 and I wouldn’t be surprised if they end the year at 4.5% or higher,” says Holden Lewis, home and mortgage expert at Nerdwallet. And Dr. Lawrence Yun, chief economist at the National Association of Realtors, expects rates to hover around 4% for most of the year.
Prediction 2: Supply Can't Keep up with Demand
The severely low supply is also helping fuel demand, and higher home prices, which is another reason why housing experts say the market will remain strong for years to come.
“The supply-demand imbalance is the primary reason home prices have escalated so rapidly,” says Rick Sharga, executive vice president at RealtyTrac. “And after not building nearly enough houses for the last decade, homebuilders will take several years at least to add enough new supply to balance the market.”
In a balanced market, the months of supply would be around six months– the time it would take to deplete all homes for sale at the current sales pace. But today’s market has only 1.7 months of supply, showing a drastic imbalance in favor of sellers.
Prediction 3: Home price appreciation will slow but will continue with double digit growth
But just how much it will slow is up for debate (and to be fair, most pros expect a rise). Recently released research from Zillow shows that annual home value growth is expected to accelerate through spring, peaking at 21.6% in May before slowing to 17.3% in January 2023. Fannie Mae says home prices will climb 11.2% throughout this year, followed by a more modest increase in 2023. But The National Association of Realtors, which surveyed more than 20 top economic and housing experts, predicts housing prices are expected to climb 5.7% through the end of 2022
Bottom Line
If you’re trying to decide whether to buy now or wait, the key is knowing what’s expected to happen with home prices. Experts say prices will continue to climb in the years ahead, just at a slower pace. So, if you’re ready to buy, doing so now may be your best bet for your wallet. It’ll also give you the chance to use the future home price appreciation to build your own net worth through rising equity.
