What Real Estate Experts Predict About the Housing Market in 2022

In the latter half of 2021, the housing market exploded. The average American home cost $287,148, a 13.2% increase from May of 2020. Home sales rose to 6.8 million.

Experts agree that changes are coming on the cusp of the new year. But is the housing boom about to bust? Unlikely. If anything, the market may cool by a few degrees, but it's in no danger of crashing or experiencing other instability. Here are eight housing market trends experts anticipate for 2022.

1. Buyer Demand Will Persist

Buyers are still in the market for properties – experts believe this trend will continue throughout 2022. However, buyer demand isn't increasing at the same frantic rate across the entire country. The south and west coast lead the nation in high buyer demand.

Properties continue to sell in approximately 18 days, and most homes sell with an average of three offers. You can expect this trend of homes moving quickly to extend into 2022.

2. Housing Inventory Will Remain Low

According to the national inventory of active housing listings, 2021 witnessed a decline of 22.2% in total inventory. Compared to last year, the catalog of newly listed homes also decreased by 3.9%.

Experts anticipate 2022 will essentially look the same as the previous year. So home buyers will have to work harder to find the perfect home, while sellers should note this is another good year to put their property on the market.

3. Housing Prices May Fall

In 2022, it’s likely the growth of home prices will slow somewhat. Experts at Freddie Mac believe the prices will grow at a rate of 5.3%, which is lower than the 12.1% increase last year. Zillow takes a moderate stance of projecting an 11.7% rise in housing market prices. However, analysts at Goldman Sachs estimate home prices will expand by 16% in 2022.

4. Foreclosures Will Likely Stay the Same

Beginning in September 2021, the government lifted its temporary ban on foreclosures, and the country saw a rapid increase in evictions due to missed mortgage payments. Foreclosure filings increased by 24%, compared to before the foreclosure ban, and were up by 102% from September 2020.

Because of the end of the foreclosure ban, experts largely expected this jump in numbers. It's also important to note that our nation's foreclosure rates are still historically lower than average. Due to these factors, the rate of foreclosures will likely plateau and remain consistent in 2022.

5. Mortgage Rates Will Increase

Up to this point, homebuyers have enjoyed low mortgage rates. In 2022, experts expect rates to be above 3% for a 30-year mortgage. The National Association of Realtors estimates 3.5%, while Freddie Mac and Kiplinger predict 3.7% and 3.8%, respectively.

Interest rates will continue to rise because of several factors. Earlier this year, the Federal Reserve increased its inflation estimates, signaling inflation will be here to stay. If the Fed raises its interest rates, banks will follow suit, and borrowers' mortgage rates will increase.

6. The Housing Market Will Stay Steady

It's improbable the housing market will crash in 2022. Experts believe the current market is healthier than the 2008-2010 housing bubble. Various factors separate the current market from those of the past. Subprime mortgages, a major contributing factor to the 2008-2010 housing bubble, now have much stricter regulations than previously. 

Additionally, the supply of homes for sale is still low, so the overall price of homes is in no danger of dropping dramatically. As long as new homebuyers continue to enter the market and the supply of homes stays consistent, the market should remain healthy.

7. How Do These Trends Impact Homebuyers?

For interested homebuyers, expect much competition when finding your dream home in 2022. Homebuyers will also need to anticipate low property supply resulting in bidding wars.

However, there’s some good news: interest rates are historically low for 15-year, fixed-rate mortgages, at 2.15 to 2.39%. Locking into a fixed-rate mortgage with a lower-than-average interest rate is ideal for any property buyer because it means cheaper monthly payments and less money going towards interest throughout the loan.

Combine low-interest mortgage rates with decreasing home prices, and the new year could be the perfect time to buy a home. However, making a purchase that important all depends on how one manages one's finances. Having no debt, setting aside an emergency fund, preparing a 10-20% down payment, and saving for closing costs will ensure one can afford a home in 2022.

8. How Do These Trends Impact Home Sellers?

There's no doubt the real estate market of 2022 still favors the home seller. There will likely be more property buyers than sellers with low home inventory. However, with the recent end of the foreclosure ban, more properties could flood the local market. Working with an experienced agent to sell a property should help set a competitive house price, navigate offers, and manage any issues.

Anticipating the Real Estate Market in 2022

The housing market in 2022 will look similar to that of 2021 – expect buyer demand to remain strong, housing inventory to stay low, and foreclosure rates to likely stay the same. Be on the lookout for housing prices to fall and mortgage rates to slowly increase. Despite the changes, the housing market should remain steady.

Author

Evelyn Long is the editor-in-chief of Renovated. Her real estate work has been published by the National Association of REALTORS®, Rental Housing Journal, and other online publications.

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