5 Exciting Housing Market Predictions and What it Means for Real Estate Investors in 2022

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Real estate experts are making some predictions about the future of the U.S. housing market based on their forecasts. With new records being set for both the speed at which homes are selling and their prices rising, the housing market remains hot despite these early signs that it may be slowing down.

Housing market predictions forecast that although prices are rising as a result of an imbalance between supply and demand, a housing bubble is not in the making. A housing market collapse resembling the Great Depression was predicted by many experts. That, on the other hand, will not happen. Compared to a decade ago, the market is far stronger. Last year, the housing market had its best year in 15 years, with single-family housing prices and rental income rising at their fastest rate in years, foreclosure rates at their lowest in decades, and a record number of homes being sold.

Prolonged underbuilding and the upsurge of millions of millennials into the buying a home market over the past decade have led to a major discrepancy in housing demand and supply. It’s unlikely that house prices will drop any time soon even though mortgage rates are skyrocketing. Slower appreciation is the most likely outcome.

Real Estate Housing Market Predictions for 2022

In this section, we’ll go over several real estate trends to look out for in 2022, such as mortgage rates, home prices, and home values.

1. Higher-priced homes may have fewer buyers competing for them.

The cost of a home loan is increasing. For the first time since 2011, mortgage interest rates on a 30-year mortgage rate hit 5 percent this month, and experts expect the interest rates on hard money loans as well conventional loans to continue rising. “Most buyers rely their price point on their monthly budget, and as interest rates rise, so do monthly payments for a provided loan size. Consequently, homebuyers would have to lower their expectations and begin searching for properties in lower price ranges because of the rise in mortgage rates. Holden Lewis, a home and mortgage expert at Nerdwallet, predicts less competition for more expensive homes and more competitive pressure for more affordable ones.

This is welcome news for would-be homeowners concerned about the rising cost of housing and the accompanying interest rates. Mortgage rates are unlikely to change dramatically or quickly, but even if they remain relatively stable, it’s a good idea to keep an eye on the market and make strategic plans.

2. Rising mortgage rates may drive some buyers away from the market.

Many any buyers will be compelled out of the market due to rising interest rates’ impact on affordability. The 15 percent increase in home prices, combined with current interest rates of up to 5%, has increased the monthly mortgage payment obligation that is unquestionably much higher than people’s income growth and consumer price inflation.

Short term loans like hard money fix and flip loans will continue to remain a popular choice for investors looking to invest in non-owner occupied properties, to conduct repairs of distressed properties and selling them in the real estate markets at greater profits.

3. Home prices will continue to rise, but at a slower rate.

Every big real estate company with a publicly available prediction predicts that housing prices will go up even more in the coming year.” However, experts predict that housing price growth will slow slightly in 2022, which is excellent news for buyers. Yearly home value rise will continue to speed up through the spring, reaching a peak at 22% as of may before steadily slowing to 17.8% by Feb 2023.  We’ll see price inflation slow later in the year and due to a retracement in demand until enough buyers reach a profitability ceiling among rising prices and mortgage interest rates,” says Nicole Bachaud, a Zillow economist.

However, experts predict that this market will not become a seller’s market anytime in the near future. “A sharp rise in mortgage rates is driving more home purchasers out of the market, but it also would seem to be deterring some property owners from selling.” With demands both falling, the market isn’t likely to move from a seller’s to a buyer’s market anytime soon, according to Redfin Chief Economist Daryl Fairweather.

4. Some employees may have to make difficult decisions about returning to work in person, which may affect their housing options.

As pandemic restrictions fade and we enter a new normal, April is likely to see broader advancements in consumer activity, including more travel. Whereas companies try to entice workers back to cubicles and congested commutes, pay increases that have lagged behind the price of gas, meal, apparel, and daycare will lead to requests for housing options near the big cities such as Washington DC that are affordable while lessening commute.
The success of work from home over the past 2 years has not only reinvented job culture and expectations but has also enabled Americans to pursue more affordable homes farther away from high-cost downtowns.  It’s possible that some people who assumed they wouldn’t have to come back to work in person will have to, which might lead to people returning to more urban areas from the more rural locations they bought during the pandemic’s peak.

5. The Housing Market Will Be Driven Higher by Millennials

According to experts of industry 2022 Housing Forecast, more than 45 million Millennials (those aged 26 to 35) plan to purchase their first homes in 2022. Millennial demand may keep prices higher despite an increase in the number of homes available.

Is it possible that the housing market is about to go into a bubble?

According to experts, a housing bubble is typically formed when demand is high, supply is plentiful, and credit is readily available.

As a result, the housing market is not experiencing a bubble. They acknowledges that the housing market has been hot, but says that since the 2008 crash, banking regulations have become much stricter and have remained that way. This is because today’s buyers are better prepared to purchase and maintain their investments, which results in fewer foreclosures.” For one thing, it could take years for the supply of homes on the market to return to normal levels. It’s unlikely, then, that there will be a massive drop in prices. However, home prices will not fall as dramatically as they did in 2008.

There has been a rise in housing demand due to factors such as the opportunity to work from home and household relocation to cheap neighborhood, demographic trends and  the approaching home purchases age of a high population group, the millennials.

This time around, we haven’t seen an increase in new construction or speculative purchases of housing with sub-prime mortgage products as we’ve seen in the previous property bubble. The new generation of first-time time buyers who haven’t been around since the market crash of 2008 raises some doubts about the lessons learned from that event.

According to McBride, “young first-time purchasers may be tempted to overreach” because of the rapid rise in home values over the last 18 months. Some safeguards have been put in place to prevent purchasers from using hazardous mortgage products to buy property they could never afford.

Signs that the market is about to crash

While most experts do not believe we are currently in a bubble or that a housing market crash is imminent, it is useful to be aware of market crash indicators. These can include the following:

Homes that are overpriced in comparison to their affordability, inflation, and economic fundamentals

  • Loan-to-income ratios are increasing.
  • Mortgage rates have risen.
  • Economic growth has slowed.
  • Mortgage balances are increasing.
  • The number of subprime mortgage loans is increasing.

Experts believe we are not on the verge of a housing market collapse. The current rate of home price growth is unsustainable, and higher mortgage rates combined with more inventory will result in slower but unlikely price declines.

Bottom line

Mortgage rates, home prices, and home values are expected to rise, but at a moderate pace. Despite the slowdown in many aspects of the housing market, the price of homes will continue to rise. The number of homes listed for sale in the year 2022 is expected to rise, which could lead to more homes being on the market for long. The housing market is still a hot market due to high demand and low supply, so buyers will have to move quickly.

An experienced lender, 14th Street Capital, can help you secure a hard money loan for non owner occupied properties. Simple asset backed hard money loans with flexible terms and no lengthy paperwork that ensures you get access to the funds you need even with a low credit score, being self employed or with a history of foreclosure. Get in touch for getting started with your real estate investments today.