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Is 2022 a Good Time to Buy a Home?

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Buyer demand increased in 2021 as low mortgage rates made homeownership more affordable and appealing. But if you missed the boat in 2021, is 2022 a good time to buy a home? Here's why it potentially is -- and isn't -- a good idea.

Pros of buying a home in 2022

The primary benefit of buying in 2022? To enjoy the benefits of homeownership sooner rather than later.

Owning a home means getting to build equity in a property. That could help you increase your net worth and give you more borrowing options should the need arise.

Cons of buying a home in 2022

High buyer demand has driven property prices up. There are fewer sellers, so prospective buyers need to contend with higher housing prices.

As such, if you buy a home in 2022, you're likely to pay a premium. And unlike last year, you may not get a low mortgage rate to offset that higher price.

In June, the median price of an existing home sold was $416,000, up 13.4% from a year prior, according to the National Association of Realtors. And since it's a seller's market, a lot of buyers go above the asking price just to get an offer accepted.

Another issue to consider is that housing inventory is very limited. The inventory of available homes as of June sat at 1.26 million units. Now, that's an increase of 2.4% from the previous year, but it's still only a 3-month supply of home. It usually takes at least a 4-month supply of homes for there to be enough inventory to meet buyer demand.

Last year, there was no spring or summertime housing surge. And there was no fall boom, either. We may see housing inventory rise slowly later on in 2022. But there certainly wasn't a spring boom this year, and while housing inventory has picked up over the summer, it needs to increase to cool down the market.

How have mortgage rates changed in 2022 (so far)?

Here's a play-by-play of what mortgage rates have looked like in 2022:

  • January: Mortgage rates started out very competitive but began to rise
  • February: Mortgage rates kept climbing
  • March: Mortgage rates saw steep increases in the wake of the Federal Reserve's first interest rate hike since 2018
  • April: Mortgage rates continued to rise sharply, with the average 30- and 20-year loans exceeding 5%
  • May: Mortgage rates held steady at higher levels, with the average 30-year loan sitting at well above 5%
  • June: Mortgage rates continued to climb, with the average 30-year loan topping 6% at one point
  • July: Rates dropped for a period of time but have since climbed back up, and as of the end of the month, the average 30-year mortgage wasn't so far off from 6%

We don't know with certainty what's in store for mortgage rates as 2022 ticks along. But there's reason to believe rates will continue to climb.

The Federal Reserve has been implementing rate hikes in 2022. And while it doesn't set mortgage rates (or any consumer borrowing rates), its actions tend to influence the cost of borrowing.

In June, the Fed raised interest rates by 0.75%, representing the largest rate hike in 28 years. As such, home buyers certainly should not expect mortgage rates to come down in 2022. If anything, they're likely to keep climbing, albeit at perhaps a slower pace than what we saw during the first six months of the year.

Should you buy a home in 2022?

Mortgage rates and housing market conditions aren't the only factors to consider. Whether you should buy a home in 2022 also depends on your personal financial picture.

You're in a strong position to buy a home if you have:

  • A steady job
  • A down payment saved up
  • A great credit score
  • Low levels of debt

You'll just need to shop around to find the best mortgage lender for you.

But if you're not in such a strong position, it could pay to postpone your home search.

Perhaps you're worried about inflation and soaring gas costs, or you don't have much money set aside for a home purchase. Or maybe you have a lot of debt, or your credit score needs work. You may even be wary of buying a home due to concerns about a potential recession. It could make sense to wait even if home prices come down in 2022, inventory opens up, and mortgage rates somehow start to drop.

The Ascent's best mortgage lenders

If you want to uncover more about the best mortgage lenders for low rates and fees, our experts have created a shortlist of the top mortgage companies. Some of our experts have even used these lenders themselves to cut their costs.

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