‘Reduced competition.’ 5 forecasts for the housing market in 2022, from economists and real estate professionals

We’ve already seen rates rise in the early months of 2022, and some pros say that will continue.

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Aspiring homebuyers may have watched mortgage rates rise in recent months (although, to be honest, they’re still near historic lows – see the lowest rates you might qualify for here), as are house prices. And all of this begs the question: what will happen to the housing market in 2022? MarketWatch Picks took a look at the latest predictions and asked the pros to share their thoughts.

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 expects average 30-year fixed-rate mortgage rates to reach 4.5% by the end of 2022, up from their projection of 4.3% the previous month. according to The Mortgage Reports. “Mortgage rates will be up and down in 2022 and I wouldn’t be surprised if they end the year at 4.5% or higher,” says Holden Lewis, real estate 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 house hunting, take note: some MarketWatch Picks experts have said this year could mean less competition. Indeed, Yun predicts less intense competition in the housing market in 2022. And Lewis says: “The combination of rising interest rates and rising house prices will push some potential buyers out of the market, which could lead to reduced competition after the summer. shopping season is over.

Prediction 3: Home price appreciation will slow

But just how much it will slow down is up for debate (and to be fair, most pros expect a boost). Research recently released by Zillow 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 that Home prices will rise 11.2% through this year, followed by a modest increase in 2023. But the National Association of Realtors, which surveyed more than 20 leading economic and real estate experts, predicts home prices are expected to rise by 5.7% until 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 individuals can benefit from a stronger, resurgent economy. . “Given the economic headwinds we see on the horizon, I believe home price appreciation will normalize in 2022 and home price growth will begin to track inflation more closely,” he said. Dallas.

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

Prediction 4: More expensive homes will be easier to get

According to Yun and data from the National Association of Realtors, homes priced at or below $500,000 are rapidly disappearing, while supply at higher prices has increased. “There are more listings at the high end, homes priced over $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 the end of mortgage forbearance programs, experts say the reality is that some people will be unable to make their payments, particularly if they are out of work. “Therefore, there will be a slight increase in seizures,” Yun said.

Millions of people obtained mortgage forbearance during the pandemic and those who remained in forbearance through 2022 are more likely to suffer 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 points out that the devastation of COVID will undoubtedly continue to contribute to market changes. “COVID’s dire death toll will necessitate housing adjustments, such as widow downsizing and estate sales.”

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