Housing market predictions for 2022

The cost to finance a typical for-sale home has increased more than $500, according to an expert

The housing market has been a whirlwind for potential buyers, and 2022 won't provide much relief. 

Would-be buyers are already being discouraged by the rise in mortgage rates and surging prices as inflation rises at its fastest pace in more than 40 years. 

Realtor.com Chief Economist Danielle Hale broke down the challenges and opportunities buyers will face in the near term:

Buyers will have limited options

The number of homes for sale has already surpassed its seasonal low, but it continues to lag, according to Hale. 

We are heading into the "the best time of the year" to list homes, and there are even more sellers entering the market. Still, Hale cautioned that "the overall landscape is still one with limited options for buyers." 

housing market

A sign is displayed outside a house for sale in Pittsburgh Jan. 4, 2019.  (AP Photo/Keith Srakocic, File / AP Newsroom)

Homes that are for sale are selling quickly, she added. 

"With both asking and sales prices for homes continuing to rise even as mortgage rates hit eleven-year highs, homebuyer budgets are being stretched," Hale said. 

Currently, the cost to finance a typical for-sale home has increased more than $500, or approximately 40%, which is nearly five times the overall inflation rate, according to Hale. 

Rising rents hurting first-time buyers 

First-time buyers aren't seeing home equity and wealth grow due to the rising cost of everyday essentials. 

For these buyers, "the challenging housing market is compounded by the fact that rising rents are making it difficult to save up for a down payment," according to Hale. 

For instance, March marked the eighth straight month in which rent growth reached double digits for studio to two-bedroom properties.  

open house

Real estate agents Rosa Arrigo, center, and Elisa Rosen, right, work an open house in West Hempstead, N.Y., April 18, 2021.  (Raychel Brightman/Newsday RM via Getty Images / Getty Images)

The median rent price in the 50 largest metros across the U.S. reached a record high of $1,807, according to Realtor.com. 

Right now, there is an increased "motivation to get into a home and lock in housing costs to prevent having to pay higher future rents," Hale said. 

Housing market will cool – but slowly 

Hale projected that prices and the speed at which homes go under contract will slow "as fewer sales and more sellers bring more balance to the market." 

Still, "the intensity of the imbalance, driven in part by a decade's worth of under-building, could mean that the housing market cools slowly," she added. 

housing market

A "for sale" sign is displayed in front of a house in Washington, D.C., March 14, 2022.  (Stefani Reynolds /AFP via Getty Images / Getty Images)

This means buyers and renters "should be prepared to act quickly." This involves having finances in order and knowing what you can afford before searching for a home or place to rent, according to Hale.

Potential buyers and renters should also consider what they need versus perks they can live without beforehand. 

"The more focused your home search, the quicker you can spot and move on the option that's right for you, and by setting up guideposts before you search, you won't get carried away in a competitive market," she said.