“Real estate prices are unlikely to go down.” 5 professionals are predicting home prices in 2022

Will house prices fall?

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Gone are the ultra-low mortgage rates of 2021. In fact, average 30-year fixed-rate mortgage rates have risen from about 3.5% to about 5.6% this year, and pros expect them to keep rising (see the lowest mortgage rates). get here now). One would think that these rising interest rates would help dampen home price growth since families are less likely to be able to afford a mortgage, but is that true? And what else is happening to real estate prices? We asked five pros to weigh in.

Prediction 1: Shortage of inventory means house prices could continue to rise

The supply of homes for sale is so low that even a big dip in demand due to higher interest rates won’t turn it into a buyer’s market, pros say. “Home prices will continue to rise because there aren’t enough homes available to meet demand, but the combination of rising home prices and increased mortgage rates means fewer people can afford to buy,” said Holden Lewis, home and mortgage expert at Nerdwallet forecasting that mortgage rates will continue to rise, but at a slower rate than in recent months (see lowest mortgage rates you can get right now here). This means demand is likely to fall in the fall and winter, although home prices will continue to rise, albeit at a slower pace, Lewis says.

Prediction 2: Cash buyers still play a big part in this housing market — and that means interest rates won’t have as much of an impact as you might think

“Nearly 30% of transactions are in cash, so there is a significant number of buyers who are not interest rate sensitive,” said Greg McBride, chief financial analyst at Bankrate. That means rising interest rates won’t have as much of an impact on this housing market as you might think.

Prediction 3: Demand will remain (almost) high, as will house prices

Rapidly rising mortgage rates have had a negative impact on demand for mortgages since the beginning of the year, but there’s no sign that demand has slowed, says Jacob Channel, senior economic analyst at LendingTree. As of April, the Mortgage Bankers Association forecasts that total mortgage origination will be $2.58 trillion in 2022, down 35.5% from 2021. While that’s a big drop, it’s important to note that it would still be $2.58 trillion higher than it was in 2019. Meanwhile, data from the Census Bureau and HUD shows that the median home price for new housing in March 2022 was higher than in March 2021, despite rising interest rates. “This suggests that even in an environment of rising interest rates, people are still willing to pay the top dollar for homes,” says Channel.

The cost of financing the typical home for sale has risen significantly over the past year, causing many buyers to reconsider their budgets and likely forcing some households out of the home buying market for now, says Realtor.com economist Danielle Hale. But at the same time, a large number of young households still want to own their own home and feel an urgent need to find a home and secure an interest rate before mortgage rates and property prices rise again (see the lowest mortgage rates you can get right now here). “Combine these adjustments to changing financial conditions with the still large proportion of key-age households to be homebuyers, and the decades-long under-construction in the housing market that has underserved the market, and it’s a recipe for prices to rise stay high. ‘ Hale says.

At the end of the day, homebuyer demand has been resilient so far given rapidly rising prices and recent interest rate gains, both of which limit homebuyer options. “There will come a point when the cost becomes too high for too many and price growth slows, but we are a long way from reaching a normal market by pre-pandemic standards. There are far fewer homes for sale than the market would normally expect at this time of year and homes continue to sell remarkably fast. Zillow economists expect property values ​​to rise another 14.9% over the next year,” said Matthew Speakman, senior economist at Zillow.

Check out the lowest mortgage rates you can get now here.

Prediction 4: It would take a big event to send house prices plummeting

Ultimately, to torpedo rising interest rates to torpedo house prices, we would need to see significantly less demand and significantly more housing supply than what we are currently seeing, pros say. “Even if price growth cools off this year, all current data suggests that house prices are highly unlikely to fall. Barring large-scale mortgage defaults triggering massive home sales like the ones we saw before the 2008 financial collapse, or mortgage rates suddenly rising to the double-digit levels they were at in the early 1980s, it seems like high home prices are here to stay,” says Channel.

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