Rates Will Continue To Rise, But They Won’t Be High.
Interest rates on mortgages have been hovering below 3% for most of 2021. Fannie Mae and Freddie Mac predict that rates will rise steadily through 2022, with the average rate at 3.33% in Q1 and 3.7% in Q4. The Federal Reserve is going to start tapering its support for the market, which means higher interest rates. With uncertainty about inflation, employment rates and the pandemic, we can’t be too sure of what might happen.
Prices Will Rise More Slowly Than They Did In 2021.
Median existing home prices had double-digit year-over-year increases throughout 2021, according to NAR data. Forecasters project slower price growth will continue into 2022. Home prices are expected to grow an average 5.6% in 2022. For example: A home that sells for $352,800 in 2021, could be worth $372,557 in 2022.
It’s not that the inventory of available homes for sale is expanding, it’s that potential buyers are being priced out.
Homeowners May Put Equity To Work.
Thanks to the increased home prices, many homeowners have more equity in their homes. For homeowners, selling their house and buying a new one may not be the best option right now. They can tap into their equity to renovate their homes, instead of moving.
Hard To Find An Affordable Home.
The inventory of existing homes for sale grew throughout 2021, but stayed low enough that we’re still nowhere near a buyer’s market. It’s getting harder for average people to afford homes as prices rise.
A study done by Harvard’s Joint Center for Housing Studies found that in 2020, a household earning 50% to 80% of the area’s median income could afford to buy a home in only 39 of 100 Metropolitan areas. In 2021, the number dropped to 20 out of 100 Metropolitan areas.
It’s A Seller’s Market, Buyers Are Getting Frustrated.
With inventory so low, most sellers can continue to expect multiple offers, being outbid is why most buyers have been unsuccessful in purchasing a home.
Millennial and Gen Z buyers are feeling the pressure when it comes to home ownership because the market is failing to supply affordable housing that keeps pace with current demographics.
The number of people actively trying to find a home has dropped, though many are still hoping. But, people will keep on buying houses no matter what, so competition will remain intense.