Housing Market Forecast for 2022
By Scott Morris
Last year, we experienced a historically hot housing market that many claimed was indicative of another 2008 bubble about to crash. Thankfully, those reports have not come to pass. But with record-pace sales, nearly 6 million houses sold, and prices that rose almost 20%, the questions that I receive most are “How long will this market last?” and “What will the new year bring?” (1)
Here’s our forecast for 2022 that covers what increasing interest rates, low inventory, and increased prices mean for you.
Increased Interest Rates
Due to the overwhelming increase in inflation, the Fed has signaled they will raise interest rates three times in 2022. (2) That means mortgage rates are likely to follow in the same footsteps. Several real estate experts, including Redfin and Realtor.com, predict mortgage rates will rise to 3.6% (up from the current 3.3%) by the end of 2022. (3) The chief economist at the National Association of Realtors believes rates will rise to 3.7%, but even that much of an increase would still be lower than the pre-pandemic rate of 4%. (4)
Rising interest rates don’t have to be a bad thing, though. One of the major factors driving the historic housing boom has been the historically low interest rates, which encouraged many speculative buyers to enter the housing market hoping to flip houses and make money. Now that rates are set to rise, there will be less of a quick buck to be made, hopefully cooling the market enough to give first-time homebuyers a better chance at securing a good home for a reasonable price. And, it’s good to keep in mind that rates are also still relatively low compared to how they’ve been the past few decades which is a great opportunity for any potential homebuyer.
Low Inventory
Unfortunately, the increased interest rates won’t be able to help with the issue of low inventory, which we believe will continue well into 2022. This was an issue even before the pandemic, but the aftermath of COVID-19 has certainly not helped the situation. Between supply chain issues and labor shortages, newly constructed homes are not keeping up with demand, and the number of homes actively listed for sale hit record lows in November 2021. (5)
We expect the gap between supply and demand will be less pronounced in 2022, but it will certainly be a factor to keep in mind if you are looking to buy this year. According to Zillow’s 2022 housing outlook, lack of inventory will be a defining feature of this year’s housing market. (6)
Increased Prices
With low supply and high demand comes high prices. As inventory remains scarce, buyers will continue to compete against one another, driving prices even higher. This means sellers will continue to have the upper hand in 2022.
Buyers can expect bidding wars and will need to be willing to offer above asking price in order to remain competitive. Zillow estimates housing prices will rise by 11% over the course of 2022, while the National Association of Realtors expects a 5.7% increase in median home prices. (7, 8) No one can predict exactly what will happen in the coming year, but we think it’s safe to assume that prices will rise. We are hopeful that the interest rate hike will keep the price growth to a more moderate level than what we saw in 2021.
How We Can Help
Taken as a whole, these three forecasts indicate that first-time homebuyers will continue to face challenges in finding and buying a home while staying on budget. We work with potential homebuyers even before they’re ready to buy. We can help create strategies that put you on a path to buy when the time is right for you.
We at SRM Real Estate Group are here to help you through the process without breaking the bank. If you are thinking about buying (or selling) a home in 2022, visit our website to learn more about how we can help. Reach out to us at 818-262-3695 or connect@srmrealestategroup.com or you can schedule a no-obligation introductory call online. We can’t wait to connect with you!
About Scott
After his son’s Type 1 diabetes diagnosis, Scott’s life took on new meaning. He created a purpose-driven business model to put people before profits. With each successful closing, he donates a portion of his earnings to his client’s preferred charity and to the Juvenile Diabetes Research Foundation. Scott’s passion and innovative approach to real estate is found in the promise he makes to every client: when you partner with the SRM team, you’ll save money, time, and together we’ll change lives.
Scott Morris is the Founder and CEO of SRM Real Estate Group, a Los Angeles real estate and mortgage company that does things differently. To learn more about Scott, connect with him on LinkedIn. You can also watch his latest webinar to find out how to be the smartest seller on your block.
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(1) https://www.cnn.com/2021/12/27/homes/us-real-estate-market-2021/index.html
(3) https://www.cnbc.com/2021/12/29/what-will-the-2022-housing-market-look-like.html
(4) https://www.cnn.com/2021/12/27/homes/us-real-estate-market-2021/index.html
(5) https://www.cnbc.com/2021/12/29/what-will-the-2022-housing-market-look-like.html
(6) https://www.zillow.com/research/zillow-2022-housing-predictions-30394/
(7) https://www.zillow.com/research/zillow-2022-housing-predictions-30394/
(8) https://www.cnn.com/2021/12/27/homes/us-real-estate-market-2021/index.html