Here’s what experts predict for the housing market in 2022

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The housing market has taken off this year as house prices continue to rise amid high inflation and ongoing supply chain issues, but some experts say prices may soon stabilize as mortgage rates go up and demand goes down.

Highlights

As the Federal Reserve prepares to trim its holdings of about $5 trillion of Treasuries and mortgage-backed securities next month, long-term interest rates have risen, the Treasury at 10 years approaching 3%.

Fixed mortgage rates have soared in recent months – to around 5% – in response to aggressive monetary tightening by the Federal Reserve, which will exert a “powerful gravitational pull” and put pressure on home sales, the economist says Chief of Moody’s Analytics, Mark Zandi.

“Upper [mortgage] rates will merge with extraordinarily high home prices and make buying a home unaffordable for most Americans,” he adds, pointing out that the current average monthly mortgage payment of $1,700 is nearly $500. more than last year and more than double what it was ten years ago.

Home sales will be under pressure as existing homeowners will be less inclined to move on and accept mortgage rates of 5% or more after experiencing record mortgages during the pandemic, Zandi says.

While house prices are “rising rapidly” in the short term thanks to low inventories and historically high inflation, this will change as more buyers are squeezed out of the market and rising mortgage rates slow down prices. price increases over the rest of 2022, predicts Bill Adams, chief economist at Comerica Bank.

Some experts also believe that mortgage rates are about to peak: “People are too bearish for housing – it’s not 2007, and we think mortgage rates are going up,” says Brett Ewing, chief market strategist for First Franklin Financial Services.

Surprising fact:

Home prices rose 19.8% in February year-over-year, the third-highest reading on record, according to new data from the S&P CoreLogic Case-Shiller National Home Price Index on Monday.

Crucial quote:

“With home sales under pressure, the parabolic rise in home prices will soon peter out, and some price declines by the middle of next year seem more than likely,” Zandi says. “With rates now rising rapidly and affordability and demand hammered, prices will be under pressure.”

Tangent:

The mortgage industry is slowing, with several large companies recently announcing layoffs amid rising rates. Several companies have cut jobs amid market turbulence: Wells Fargo confirmed last week that it had laid off an undisclosed number of home loan employees, while mortgage lender Better.com also announced new layoffs after a series of layoffs in December and March.

Further reading:

Dow drops 350bps, yields rise after Powell signals bigger rate hikes from May (Forbes)

IMF warns of ‘significant slowdown’ as war in Ukraine and inflation hit global economies (Forbes)

Calls for recession mount as inflation threatens corporate profits and rising costs hit consumers (Forbes)

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