Would-be homebuyers may have seen mortgage rates rise in recent months (although to be fair, they’re still near record lows; see the lowest rates you can qualify for here), as have prices. of the houses. And it all begs the question: What will happen to the housing market in 2022? MarketWatch Picks researched the latest predictions and asked professionals to share their thoughts.
Prediction 1: Mortgage interest rates will rise
We’ve already seen rates rise in the first few months of 2022, and some professionals say that will continue. The Mortgage Bankers Association predicts that average rates on 30-year fixed-rate mortgages will reach 4.5% by the end of 2022, up from the previous month’s 4.3% projection, 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, housing 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: Expect less intense competition
If you’re looking for a home on the market, take note: Some experts MarketWatch Picks spoke with said this year may mean less competition. In fact, Yun predicts less intense competition in the housing market in 2022. And Lewis says, “The combination of rising interest rates and rising home prices will push some potential buyers out of the market, which may result in reduced competition after the summer. the shopping season is over.
Prediction 3: Home Price Appreciation Will Slow
But how much it will go down is up for debate (and to be fair, most pros are expecting an increase). Newly released Zillow research shows that annual home value growth is expected to accelerate through 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% through this year, followed by a more modest rise in 2023. But the National Association of Realtors, which surveyed more than 20 housing and economic experts, predicts that house prices are expected to increase by 5.7% through the end of 2022
Bill Dallas, president of Finance of America Mortgage, says he believes we will continue to see the highest levels of home price appreciation in rural and suburban markets where people can benefit from a stronger and resurgent economy. “Given some economic headwinds we see on the horizon, I think home price appreciation will normalize in 2022 and home price growth will start to track inflation more closely,” says Dallas.
Another thing to consider: higher interest rates will force buyers to shop at lower price ranges in order to afford monthly payments. “Affordability issues will slow home price growth to less than 10% this year,” says Lewis. “With the Fed using its policy levers to push mortgage rates higher, expect home prices to rise more slowly as buyers are forced into lower price ranges,” says Lewis.
Prediction 4: The most expensive houses will be the easiest to get
According to Yun and data from the National Association of Realtors, homes priced at $500,000 or less are rapidly disappearing, while supply at higher prices has increased. “There are more listings at the higher end, homes priced above $500,000, compared to a year ago, which should lead to less hasty decisions by some buyers,” says Yun.
Prediction 5: Foreclosures will increase
With mortgage forbearance programs coming to an end, experts say the reality is some people won’t be able to make their payments, especially if they don’t have a job. “So there will be an increase in foreclosures,” says Yun.
Millions of people obtained mortgage forbearances during the pandemic and those who remained in forbearance through 2022 are more likely to experience permanent financial hardship. “When their forbearances end, they are less likely to be able to resume their payments and more likely to end up in foreclosure,” says Lewis.
And Yun notes that the devastation from COVID will undoubtedly continue to contribute to changes in the market as well. “The terrible death toll from COVID will require housing adjustments, such as the reduction of widows and the sale of assets.”