Somehow, the year is almost behind us -- and so is 2021's wild ride for housing.

It was a year filled with skyrocketing home prices, the return of bidding wars, and bargain-basement mortgage rates. Inventory dried up, while lengthy foreclosure and eviction moratoriums only complicated matters.

It was a historic year, to say the least.

Will 2022 offer more of the same? Or can buyers and investors expect fewer challenges? Let's take a look at what's projected for real estate in the coming year.

a family looks at the interior of a house with a real estate agent

Image source: Getty Images

1. Foreclosures will climb

Despite the financial struggles many have faced during the pandemic, foreclosures have been largely nonexistent during the past 18 months, thanks to a nationwide foreclosure ban. The moratorium expired in July, though, and foreclosure rates have already started to climb as a result.

According to ATTOM Data Solutions, the third quarter of 2021 saw significant increases in foreclosures, with a 34% uptick over the second quarter and a 68% jump from a year earlier. While actual volume is still well below historical norms, foreclosures will likely continue to creep up as the new year rolls around -- particularly as more and more homeowners exit forbearance programs.

As Rick Sharga, executive vice president of foreclosure platform RealtyTrac, put it: "There are hundreds of thousands of borrowers scheduled to exit forbearance in the next two months, and it's possible that we might see a higher percentage of those borrowers default on their loans."

2. Home price increases will begin to slow

It's no secret that home prices have been on a tear this past year. According to the latest Federal Housing Finance Agency numbers, as of August they had jumped a whopping 18.5% from the same month in 2020.

Fortunately for buyers, the days of huge price jumps like this may be numbered. Although no one's predicting a decline in home prices, most analysts expect prices to appreciate at a slower clip than we've seen lately.

CoreLogic, for example, predicts a 2% increase by September of next year, while Freddie Mac predicts a 7% bump during 2022. Zillow predicts the slowdown will begin once the new year kicks off.

3. Mortgage rates will increase

With the Federal Reserve tapering its mortgage-backed securities purchases because of rising inflation, we can expect mortgage rates to rise. They've already shown signs of this, with the average 30-year fixed-rate loan jumping in recent weeks. Though Freddie Mac reported a slight decrease this week (from 3.07% to 2.98%), economist Sam Khater says it's a temporary blip. "While mortgage rates fell after several weeks on the rise, we expect future upticks due to stronger economic data and as the Federal Reserve pulls back on its stimulus," he said. .

Others back this sentiment. The Mortgage Bankers Association predicts that rates will rise steadily over the course of the year, averaging 3.3% in the first quarter and hitting 4% by year-end. Originations -- especially those to refinance -- should drop significantly as a result.

4. Inventory should improve

One of the biggest hurdles this year has been tight inventory. Demand for housing was there, but for-sale listings? They weren't. In fact, inventory hit its lowest ever at one point, with just a 3.5-month supply of homes for sale -- meaning it would take that long for all the homes on the market to sell. 

While next year probably won't mark a huge turnaround on the inventory front, buyers should see some relief. In September, the backlog of homes for sale reached the six-month mark. While that's still a dearth comparatively speaking, the inventory drought has been receding for some time. The difference between last year's for-sale inventory and this year's has shrunk for several months straight.

Getting closer to normal

By most accounts, 2022's housing market should be a little closer to normal than was this year's. While we likely won't see a complete 180, investors and buyers should face fewer headwinds when looking to purchase a property. You might get a better deal, too.