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What to Expect in the Housing Market in 2022 Feature Image
Posted on March 11, 2022 6 minute read

What to Expect in the Housing Market in 2022


What's in this article?

Housing Market Predictions for 2022
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How to Purchase a Home in 2022
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Get Pre-Approved for a Mortgage with Homefinity
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After a year filled with record-breaking ups and downs, 2022 is expected to sustain some 2021 real estate market trends while turning others on their heads.

There still may be some challenges for buyers to overcome, but preparation is key to understanding what to expect in the housing market in 2022, and how to prepare.

Let’s dig into the top 2022 housing market predictions, from mortgage rates to buyer preferences.

Housing Market Predictions for 2022

Last year was the perfect storm of scorching housing demand and skyrocketing prices, driven by multiple factors.

Historically low mortgage rates marked early 2021, making home buying more affordable for many.

The pandemic changed buyer’s desires, including the urge to leave city life behind and settle into larger homes that filled the gaps left by stay-at-home orders and remote work opportunities.

This sustained demand made competition fierce, and eventually led to a lack of home supply that drove prices to record highs.

Now that we’ve entered a new year and many factors have been stretched thin, let’s take a look at what’s to come.

Mortgage Rates On the Rise

The economy is slowly improving as the world climbs out of pandemic-driven fall. 

This is partly due to policy actions taken by the Federal Reserve early in the pandemic. The Fed’s main function is to ensure financial stability in the U.S., which it performed by putting policies in place to drive down interest rates.

With this economic improvement has come rising inflation, which the Fed must once again take action to curb.

As a result of these factors, market experts were predicting mortgage rates would rise to 4% by the end of 2022, but they already rose to 3.75% in January alone.

While many experts still predict we will end the year with 4% to 4.5% mortgage rates, the fluctuations are expected to continue as the economy seeks balance.

Supply Issues Plague Buyers and Builders

Not only are prospective buyers facing a low inventory, but builders are struggling with supply chain issues as well.

While some experts predicted at the end of 2021 that the housing supply would grow significantly even in the first few months of 2022, this hasn’t been the case yet.

As a result, there is sustained housing demand for a dwindling supply of homes. Competition is remaining strong for the homes that do exist, which means prices are still rising.

However, it is likely that more of a balance will develop as the year continues. Rising rates should slowly calm demand and inventory will continue to grow.

Home Price Increases Slowing

Most experts are in agreement that while home prices still are on the rise, the rate at which they are rising is slowing.

In 2021, we saw double-digit price gains from the previous year. This year, the growth rate is expected to calm significantly.

Fannie Mae says prices will jump 8.4% this year, while Freddie Mac predicts 6.2%.

For context, the average rate of appreciation is 4.6% annually, and it reached nearly 20% last summer.

While these predictions are still higher than average, they indicate a movement toward more balance in the market.

Rising Rent Could Make Buying More Affordable

Another 2021 trend was the rise in rent payments due to the increased cost of housing. 

This led to a surge of investors buying up single-home properties to turn into more rental opportunities.

As a result of rising rent rivaling the costs of paying a mortgage, some first-time buyers are encouraged to take the plunge and finally make a home purchase.

Buyers Making More Compromises

In some aspects, buyers became much more specific about their home purchases in 2021.

There was a high demand for more space, including room for a home office and gym since the pandemic limited access to public spaces.

Now, with the severe lack of inventory of single family homes so far in 2022, some buyers eager to get into a starter home aren’t being picky.

For some buyers, especially first time homebuyers, it’s become more important to find a suitable home, rather than to wait around to find their dream home — especially if their dream home is now way out of budget.

Home Search May Take Longer

Whether prospective buyers are waiting around for their dream home or settling for a starter home, they can expect to wait longer before they find it.

With such intense competition, homes are quickly flying off the listings.

This is leading to an increased number of homes toured before a purchase, and more time in general spent toward the home search process.

If you’re just starting the home search, keep this in mind as you shop to reduce frustration and buyer fatigue.

Use house hunting apps to alert you to new listings so you can quickly schedule a tour and make your offer.

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How to Purchase a Home in 2022

The decision to purchase a home should be made based on your personal financial situation above all other factors.

While the housing market in 2022 is filled with unique trends that could make buying a home more difficult than previous years, it all depends on your location, your wants, and your financial health.

Connecting with a reputable local real estate agent and trusted mortgage loan officer will help you understand your preferred buying area’s unique characteristics, and match you with what you can afford.

Get Pre-Approved for a Mortgage with Homefinity

The first step in the home buying process is to get pre-approved for a mortgage. 

This step automatically puts you ahead of the competition by showing sellers you are serious about purchasing.

The professional mortgage loan officers at Homefinity are ready to answer your questions and help you navigate your loan options and the lending process.

To get started, fill out our brief application to get a rate quote. We look forward to hearing from you and helping you through the process.

Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.

Pre-approval is based on a preliminary review of credit information provided to Homefinity, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.