Housing Market Predictions 2022: Will It Drop?

Housing Market Predictions 2022: Will It Drop?

Ramsey Solutions


Housing Market Predictions 2022: Will It Drop?

So, you’re thinking pretty hard about buying or selling a home and want to know how the housing market will look. Well, housing market predictions are about as reliable as weather forecasts—no one can predict what’s going to happen with 100% accuracy. But we can check out what real estate experts are saying and make some pretty good guesses about the future from there.

Remember, a housing market forecast can only give you an idea of what to expect if you buy or sell a house in the coming months. Never let it control your housing decisions—only your personal situation and finances should do that!

With that said, let’s take a closer look at what the market is doing.

Housing Market Predictions for 2022

Okay, first things first: 2022 is not 2021. The crazy time of houses selling in a few hours after getting 20 offers for thousands of dollars over asking price is finished. But the market is still strong. It’s just not crazy anymore. And really, crazy just adds an extra level of stress to buying or selling a house.

So, three cheers for no more craziness!

Home Prices and Sales

That said, home prices are pretty much determined by supply and demand. And since there’s still a shortage of homes for sale and strong demand, prices are up in 2022. The median price of existing homes hit $407,600 in May. That’s up from $358,800 in December 2021.1

Find expert agents to help you buy your home.

Fannie Mae predicts home prices to be up 10.8% for the year.2 That’s a big bump up from its prediction of 7.6% just a few months ago.3 But keep in mind that these predictions and forecasts change almost daily.

In the first five months of 2022, we saw the number of home sales decline from their 2021 highs and return to pre-pandemic levels.4 Supply is still tight though, with about half as many new homes being built as there were in 2007.

Interest Rates

And let’s not forget how interest rates will affect the overall cost of your home! Last year, interest rates were at an all-time low—averaging 2.3% for a 15-year fixed-rate mortgage and 3% for a 30-year fixed-rate mortgage.5,6

Heading into 2022, experts forecasted 30-year mortgage rates to increase to 3.6%.7 Well, those experts were way off.

The Federal Reserve has raised its benchmark interest rate several times to fight high inflation. While the Fed doesn’t set mortgage rates, its actions affect interest rates for all borrowers. So, higher Fed rates coupled with inflation have pushed mortgage rates to about 4.8% for a 15-year fixed-rate mortgage and 5.7% for a 30-year fixed-rate mortgage.8 (And the Fed is planning more rate hikes later this year.)

Rates fluctuate daily, but overall, they’re about 2% higher than they were six months ago. This stinks because it means new buyers will end up paying a lot more interest on their house over time. 

Keep in mind, all these numbers will change as the experts crunch new data. But the bottom line is that in the second half of 2022, home sales will slow down some, interest rates will continue to go up, and home prices will likely keep on rising (but at a slower pace than in 2021).

Okay, now that we’ve covered a housing market forecast at the national level, let’s dig deeper into what’s happening for buyers and sellers and explore the top questions people have about the housing market.

Will Buyer Demand for Housing Remain Strong?

Real estate experts say buyer demand will stay pretty darn strong in the second half of 2022. In May, home sellers received roughly 4 offers from buyers, which is lower than April but still about double the number of offers sellers received per month before the pandemic.9 10

Homes sold in May spent a median of only 16 days on the market, and a little over half of homes sold above list price.11 So, even though higher interest rates have lowered demand, homes are still moving quickly, which is a great sign for sellers.

And one more thing—the number of people of prime home-buying age (25–34) is 18% higher than in 2006.12

Will Housing Inventory Still Be Low?

Yep, it’s looking like the number of houses on the market in the second half of 2022 will continue to be low. Total housing inventory at the end of May was 1.16 million, which is a 4.1% decline from May 2021. Unsold inventory would have to almost double to really cool down the hot market.13

When inventory is low, buyers have to work harder or wait a little longer to find their dream home. But if you’re thinking about selling your home, now’s a great time—you’ll be one of the few sellers in your market.

How Fast Will Homes Fly off the Market in 2022?

There’s a good chance homes will continue getting snatched up fast in the second half of 2022. In 2020, most homes stayed on the market for 21 days—and now we’re seeing homes selling after a median of 16 days.14

This is great news for sellers who are itching to get their homes sold fast. But buyers need to stay focused! You don’t want to drag your feet once you find a home that fits your budget and your family because it’ll likely be gone if you wait too long to commit. That’s why you’ve got to know exactly what to look for in a home and what you can afford before you jump in the game.

Of course, every market is a little different.

Will There Be a Lot of Foreclosures in 2022?

The nation started seeing a jump in foreclosure activity toward the end of last year, but the numbers are still much lower than pre-pandemic levels. In fact, foreclosures hit an all-time low in 2021, down 30% from 2020 and 95% from its peak in 2010 during the housing market crisis.15

One huge, glaring reason for that historic low was the government’s temporary ban on foreclosures as a pandemic relief measure. Foreclosures weren’t happening for most of last year because they couldn’t happen.

Foreclosures increased in the first part of 2022 after the government lifted the foreclosure ban, but they are still only 57% of where they were before than pandemic.16 So, while some predicted a huge wave of foreclosures after the ban was lifted, that hasn’t been the case.

Here’s what all this foreclosure stuff means for homeowners and buyers:

  • Homeowners: With the end of the government’s ban on foreclosures, it’ll be tough for any homeowner who lost a stable job and income to keep up with mortgage payments. If that’s you, hang in there! There’s more you can do to avoid foreclosure, like tightening up your monthly budget and picking up a side hustle.
  • Home buyers: If you’re waiting to find a sweet deal on a foreclosure, don’t hold your breath! This market is nothing like 2010. Keep in mind, buying a foreclosed home could come with its own set of potential issues. So, make sure you do your homework on the house and know what you’re getting yourself into before you buy.

Will the Housing Market Crash in 2022?

It’s pretty unlikely that the housing market will crash in the next few years. Experts say the current market is way different from how it was during the housing market crisis that caused the Great Recession of 2007–09.

Lending rules are much more strict now, so there won’t be a bunch of foreclosures. Plus, housing supply is still super low and probably won’t catch up for a few years—so there’s little to no danger of home prices dropping like a rock.

Will Housing Market Prices Go Down in 2022?

Like we said, it’s unlikely that home prices will go down in 2022 and beyond. Freddie Mac predicts home prices will grow at a slower rate of 5% in 2023, but they’re not going to drop in the coming years.17

Hey, it’s really hard to predict home prices. So whatever you do, keep saving for a big down payment if you want confidence when buying a home.

Is 2022 a Good Year to Buy a Home?

The year 2022 could be a great year to buy a house—if you’re ready. It could also be a horrible time to buy if you’re not. Remember, don’t let what’s happening with the housing market make your decisions for you.

The things that really matter when buying a house are your personal finances and season of life. No matter what’s happening in the market, you’re only ready to buy a house if you meet these qualifications:

  • You’re debt-free.
  • You have an emergency fund of 3–6 months of expenses.
  • Your monthly house payment will be 25% or less of your monthly take-home pay.
  • You have a down payment. A 20% down payment is ideal because you’ll avoid paying private mortgage insurance (PMI). But 5–10% will also work—especially if you’re a first-time home buyer. Just be prepared to pay PMI. And steer clear of FHA and VA loans—you’ll pay much more interest with them.
  • You can pay the closing costs up front.

If you don’t meet these qualifications, it doesn’t matter if the market is in your favor. Buying a home right now would end up being a curse instead of a blessing. Take your time and get in a better financial position so you can buy a house the right way.

What Does All This Mean for Home Buyers in 2022?

Okay, it looks like you’ll still need to bring your A game if you want to buy the home of your dreams in this market. With more buyers than sellers, you’ll probably be up against some heavy competition and high housing market prices.

Another downside: Signs are showing that the low inventory issue is going to hang around for awhile.

And while homebuilders are confident they’ll do plenty of business in 2022, that doesn’t mean buying a newly built house will be easy for you. Rising lumber prices, supply shortages and even government tariffs are all making it crazy hard for homebuilders to actually build enough houses to keep up with demand.18

Translation: The pickings may be slim when it comes to buying a house. That means you may have to give up some of your wants to get a house that has everything you need.

What Does All This Mean for Home Sellers in 2022?

Sellers out there can feel pretty good about selling their homes in 2022. If that’s you, you might want to put your house on the market sooner rather than later—while inventory is still low. (But again, only do that if you’re truly ready to sell your house. Don’t let the market be the deciding factor!)

When you decide to sell, keep in mind that there aren’t quite as many buyers in 2022 as there were in 2021, but there are still lots of people wanting a home.

So if you work with an experienced agent, you’ll be able to capitalize on home prices, navigate multiple offers, and find the right buyer. With an expert by your side, it’ll be even easier to sell your house at a great price this year.

How to Buy or Sell With Confidence in Any Housing Market

The housing market isn’t known for being easy to predict. That’s why it pays to have a professional in your corner who’s earned the RamseyTrusted shield.

Whether you’re buying or selling, you need an agent who has weathered the storms of real estate. And you can find them through our Endorsed Local Providers (ELP) program. ELPs are top-notch agents who help you crush your housing goals—no matter what the market is doing.

Find a RamseyTrusted agent!

Source: ramseysolutions.com


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