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2022 Housing Market Forecast From LendingTree

Katie Jensen
Jan 05, 2022
Real house prices in June fell by 1.3 percent from May but increased by 9.3 percent year-over-year, according to new data from First American Financial Corp.’s Real House Price Index

While prices likely won’t fall this year, they won’t continue to skyrocket like they did in 2020 and 2021.

KEY TAKEAWAYS
  • Housing market fundamentals, such as people’s ability to make their mortgage payments, looks to remain strong in 2022. 
  • While prices likely won’t fall this year, they won’t continue to skyrocket like they did in 2020 and 2021.
  • Supply chains should improve as more people become vaccinated and return to work.
  • The LendingTree team also forecasts the average mortgage interest rate to hit near 4% by the end of 2022, which is still relatively low historically. 

Though not as tumultuous as 2020, the housing market was red hot for most of 2021. Homeowners saw their home values skyrocket, using the opportunity to tap into their home equity. Meanwhile, plenty of people took advantage of near-record low mortgage rates to purchase a home or refinance their mortgage, which helped offset the cost of dramatic home price increases. 

The past year also brought its challenges as home affordability issues grew even worse, according to a LendingTree study. Even with low rates, many households could not compete in a market where rising prices and bidding wars were the norm. 

In the broader economic perspective, the year 2021 was equally hit or miss. More Americans returned to work and many negotiated for higher wages; however, inflation offset many gains. Even the COVID-19 pandemic shows no signs of slowing, despite the vaccination rate increasing.

Looking towards the future, LendingTree paints a lighter picture by listing the potential economic upsides in 2022. The predictions laid out in this article are based on the opinions of the author Jacob Channel, and editors Dan Shepard and Pearly Huang. 

First off, the housing market likely won’t crash. Because home prices have risen so much since the beginning of the pandemic, many fear we’re in a housing bubble – similar to the one pre-dating the 2008 market crash. LendingTree points out there isn’t any evidence to support this theory. Housing market fundamentals, such as people’s ability to make their mortgage payments, looks to remain strong in 2022. 

Home price growth is expected to moderate, albeit slowly. While prices likely won’t fall this year, they won’t continue to skyrocket like they did in 2020 and 2021. Although the decline in price growth won’t alleviate affordability issues by much, it should help some people who have been constantly priced out of their market. Plus, people who recently bought their home won’t have to worry about becoming underwater on their mortgage. 

Supply chains should improve as more people become vaccinated and return to work. Delays in the production and transportation of finished goods and raw materials should become less prevalent, helping to alleviate global supply chain issues and lower prices slightly. 

Inflation may be less of an issue as the year wears on. Improved supply chain, higher interest rates, and reduced consumer spending should make inflation more manageable as the year progresses. 

The LendingTree team also forecasts the average mortgage interest rate to hit near 4% by the end of 2022, which is still relatively low historically. 

Nationwide, average home price growth will be less than 5% due to a greater supply of homes hitting the market and diminishing consumer demand due to higher interest rates. 

The effective federal funds rate has remained at 0.1% or lower since April 2020. Yet, recent inflation concerns have caused the Federal Reserve to raise interest rates. Currently, LendingTree expects anywhere from two to three rate hikes at 25 basis points each. If inflation proves to be too sticky in the coming months, though, rates might hike up even more. 

Overall, while 2022 is on track to be more stable than the past two years, there is no guarantee it will be. People should be prepared to act quickly and react to sudden changes in the housing or jobs market. This could mean setting aside money for an emergency fund or being ready to snatch a good deal on a home at any moment.

Published
Jan 05, 2022
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