The first half of the year has certainly been interesting from a housing market perspective. Mortgage rates surprised everyone by rising sharply, while housing inventory largely remained stagnant.
Whether you're looking to buy a home to live in yourself or you're a real estate investor vying for an income property, it's important to know what to expect from the housing market during the second half of the year. And while we can't say with certainty how things will shake out, here are some of the trends we might see as 2022 moves along.
1. Mortgage rates will remain high, but increases should taper off
Mortgage rates have risen substantially since the start of the year. That's largely due to the Federal Reserve's rate hikes. While the Fed doesn't set consumer interest rates, its actions commonly influence them. And with more rate hikes planned for the year, consumers should expect mortgage borrowing to remain expensive throughout 2022.
But will we see the same sharp increases in mortgage rates during the second half of the year that we did in the first half? Not necessarily. Right now, mortgage rates are sitting at their highest level in 13 years. They might continue to rise modestly, but it's doubtful that they'll climb at the same pace as they did from January through May.
2. Housing inventory will increase, but only a little
As of late March, the inventory of unsold homes reached 950,000 units, as per the National Association of Realtors (NAR). That's a modest uptick from February. However, that number of available homes only represents a two-month supply. And it takes a four- to six-month supply of homes to create an equalized housing market.
As the year progresses, there's a good chance housing inventory will continue to pick up. At this point, sellers are less likely to use pandemic-related uncertainty as a reason to keep their homes off the market. But buyers shouldn't anticipate a major uptick in inventory, either.
In fact, spring is usually when home listings pick up a lot. But so far, there are no indications that inventory levels are shooting upward to a notable degree.
3. Home prices will remain high
Because housing inventory isn't expected to pick up all that much during the latter part of the year, home prices are likely to remain elevated. That means many buyers -- first-timers in particular -- are apt to struggle to break into the market, especially in light of higher borrowing rates.
As of the end of March, the median existing home sale price rose to $375,300. That represents a 15% gain on an annual basis. We could continue to see comparable gains as 2022 rolls along.
Buyers could have a tough road ahead
Buying a home may not be easy at any point in 2022 -- especially if these predictions hold. Buyers will have to be patient and prepare to be flexible at a time when homes are hard to come by, prices are way up, and borrowing is no longer as affordable as it was in 2021.