3 Home Buying Predictions for 2022

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  • The housing market could change a lot in 2022.
  • Those changes could be a mixed bag for buyers, thanks to rising rates and more inventory.

Here's what may be in store for buyers in 2022.

As someone who's been covering the housing market for years, I can say 2021 was really surprising in many ways. Not only did mortgage rates stay really low throughout the year, but home prices soared to extreme levels while inventory stagnated.

Since I don't have a crystal ball, I can't say with certainty what 2022 has in store for home buyers. But here's how I see things shaking out.

1. Mortgage rates will continue to climb

Mortgage rates dropped to historic lows in 2020 and remained low in 2021. To be clear, they're still pretty low to this day. But they've already climbed substantially during the first five or six weeks of 2022, and I can see them continuing to tick upward as the year moves along.

Why so? For one thing, rates could only stay low for so long. At some point, they were bound to come back up.

Also, the Federal Reserve will be raising its federal funds rate this year. While the Fed doesn't set consumer interest rates (it only determines what rates banks charge each other for short-term borrowing), it has the potential to influence rates. As such, it won't surprise me to see mortgage rates climb this year, to the point where the average 30-year mortgage is above 4%.

2. Housing inventory will pick up

The housing market has been starved for homes since buyers started scooping them up in 2020. A big reason inventory has been sluggish has likely boiled down to fear -- sellers not wanting to list their homes during a major health crisis.

At this point, though, the U.S. is starting to learn to live with COVID-19 as we approach our third year in pandemic territory. More home sellers may come to terms with the fact that the virus isn't going away, and they'll no longer use it as a reason to put off selling.

3. Homes will become moderately less expensive

A big reason home prices are so inflated right now is because the demand for them well exceeds the available supply. But if housing inventory picks up in 2022, that could help ease buyer demand and limit bidding wars, which are notorious for driving up home prices.

Now to be clear, I don't expect homes to suddenly become affordable overnight. As of November, home prices were up 18.8% from the previous year, and it's going to take time to come down from that level. But as inventory picks up, prices should slowly but surely tick downward.

Another thing that might happen is higher mortgage rates could lead to diminished buyer demand. That, too, could result in lower home prices.

While I may end up being totally wrong on all of the items above, there's a good chance home buyers in 2022 will be looking at higher mortgage rates, more inventory, and eventually, lower home prices. And while higher mortgage rates aren't a good thing, an uptick in inventory and a drop in average home price will no doubt benefit buyers.

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