What’s the Right Time To Buy Real Estate

The story of 2021 was how quickly home prices accelerated. The national median home price hit $362,800 in June, an all-time high, according to the National Association of Realtors. The Case-Shiller home price index peaked in August, when prices rose 19.8 percent year-over-year that month. Phoenix home prices were up 33.3 percent year-on-year, San Diego home prices were up 26.2 percent, and Tampa home prices were up 25.9 percent.

Here’s a look at what the housing experts expect in 2022.

The housing market was doing well at the turn of the year and may normalize, said Lawrence Yun, chief economist at the National Association of Realtors, a trade association for real estate agents.

“All markets are seeing strong conditions, and home sales are the best they have been in 15 years,” Yun said. “The housing sector’s success will continue, but I don’t expect [2022’s] performance to exceed [2021’s].”

He said sales may decline this year but predicts that they will exceed pre-pandemic levels. His forecast is based on an expectation of more inventory in the coming months. The increased supply will be generated, in part, from new housing construction as well as from the end of forbearance for struggling mortgage payers, a situation that will cause some homeowners to sell.

“With more housing inventory to hit the market, the intense multiple offers will start to ease,” Yun said. “Home prices will continue to rise but at a slower pace.”

Yun projects that mortgage rates will increase to 3.7 percent in 2022, pushed up by persistently higher inflation.

NAR surveyed more than 20 economic and housing experts to gauge their expectations of home-price growth, new-home sales and existing-home sales for 2022. The group predicted that median home prices will rise by 5.7 percent this year. New-home sales are forecast to rise to 920,000 in 2022, up from last year, which is expected to have had about 800,000 new-home sales. Existing-home sales are anticipated to dip to 5.9 million, down from last year, which is expected to have had about 6 million sales of existing homes.

Home buyers will have a better chance to find homes in 2022 but will face a competitive seller’s market, said Danielle Hale, chief economis 

“Affordability will increasingly be a challenge as interest rates and prices rise, but remote work may expand search areas and enable younger buyers to find their first homes sooner than they might have otherwise,” she said.

Hale predicts the price appreciation for existing homes will be 2.9 percent.

“Affordability challenges will keep prices from advancing at the same pace we saw in 2021 even as ongoing supply-demand dynamics mean prices continue to grow nationwide,” she said.

Hale says sales of existing homes will rise 6.6 percent. She expects 2022 to have the second-highest sales in the past 15 years, surpassed only by 2021.

The number of homes on the market will tick up by 0.3 percent, and single-family housing starts will rise 5 percent, she says, and she expects the 30-year fixed mortgage rate to average 3.3 percent for most of the year and be at 3.6 percent by the end of the year 

Homeownership among Hispanics will continue to grow, Hale said.

“Hispanic home buyers are already a sizable share of the housing market, comprising more than 1 in 10 recent home buyers, yet still underrepresented relative to their roughly 1-in-5 share of the U.S. population,” she said. “This demographic group is expected to play a growing role in the home-buying market. Notably, recently successful Hispanic home buyers were younger than the population of recent home buyers at large, and a majority were first-time home b

Mortgage Bankers Association

The trade association for the real estate finance industry forecasts mortgage originations for purchases to grow 9 percent in 2022, to a record of $1.73 trillion. MBA economists are expecting refinance originations to tumble by 62 percent to $860 billion this year, down from an estimated $2.26 trillion in 2021.

Total mortgage originations (purchase and refinance) are expected to decline 33 percent from 2021 to $2.59 trillion. Purchase originations are forecast to rise to a record value this year, but higher mortgage rates are expected to dampen refinance volume.

MBA economists predict that the 30-year fixed-rate mortgage will rise to 4 percent by the end of 2022.

“Mortgage lenders and borrowers should expect rising mortgage rates over the next year as stronger economic growth pushes Treasury yields higher,” said Mike Fratantoni, MBA’s chief economist.

Fratantoni expects another strong year for the housing market.

“Home builders will have more success overcoming current building material shortages and should be able to increase the pace of construction to meet the sizable demand for buying,” he said. “More newly built homes and more homeowners listing their homes for sale should lead to some deceleration in home-price growth next year. This is good news for the many would-be buyers who are currently priced out or delaying decisions because of low supply conditions and steep home-price appreciation.”

Credit availability is about 30 percent lower than pre-pandemic levels.

“Mortgage supply will need to increase modestly so that qualified buyers can get access to financing for their home purchase,” said Joel Kan, an MBA economist. “This will be important for the wave of potential first-time homeowners who are approaching prime homeownership age.”

Greg McBride, chief financial analyst at the financial website, predicts that the 30-year fixed mortgage rate will peak at 3.75 percent during the year and fall back to 3.5 percent by the end of the year.

“Long-term rates will move higher in the first half of the year, but by the close of 2022, concerns about slowing economic growth will be unwinding that and bringing them back down,” he said. “This will be higher than where mortgage rates started the year but ending at levels previously unseen before the pandemic began in 2020. The drop-off in refinancing activity will mean lots of competition among lenders thirsting for volume and plenty of lenders with rates much better than the average.”

McBride expects that the rate for home equity lines of credit will be 50 basis points (0.5 percent) higher by year-end. He forecasts that the HELOC rate will be 5.05 percent and the home-equity loan rate 6.25 percent.

“Homeowners with existing home-equity lines of credit can expect their rates to march higher alongside Fed rate hikes,” he said. “The average HELOC rate will move up by more than that, however, as many of today’s promotional offers below 3 percent will not be around at the end of 2022. On home-equity loans, a fixed-rate product offered by far fewer lenders, the average rate will trend higher in response to [Federal Reserve] rate hikes but more modestly, rising a little more than one-quarter percentage point by year-end.”

After two tumultuous years, Jacob Channel, senior economic analyst at the online loan marketplace, says this year should be less dramatic.“2022 is on track to be — at the very least — somewhat more stable than the past two years,” he said. “But we still aren’t likely to see the housing market and the broader economy immediately return to pre-pandemic norms.” Channel predicts that the 30-year fixed mortgage rate will rise to near 4 percent by the end of the year.

“This could make home affordability an even greater challenge, especially for lower-income buyers,” he said. “Fortunately, rising rates aren’t all bad news, as higher rates will likely mean fewer new home buyers and an overall less hypercompetitive housing market.”

Channel foresees home price growth of 5 percent in 2022.

“Home prices throughout much of the U.S. have risen dramatically since the start of the pandemic, but a greater supply of housing on the market and diminished consumer demand driven by higher rates should result in much less growth this year,”