Here's what the housing market will look like in 2022, according to an expert

Competition is predicted to cool off, but mortgage rates and home prices are expected to rise

Home sales are expected to increase as supply begins to meet demand, which is good news for consumers who are considering buying a home in 2022. (iStock)

The 2021 housing market was a mixed bag for prospective homebuyers. Although mortgage rates reached record lows early in the year, supply shortages drove insurmountable competition and caused home prices to skyrocket.

But there's good news for those who waited to buy a house until 2022, according to Lawrence Yun, chief economist at the National Association of Realtors (NAR). Housing supply and demand will move toward stability, which will cool off competition as buyers have more options to consider.

"Movement toward balance is a good thing for both the buyers and the sellers," Yun said. "Buying a home is such a major expenditure, people don’t want to be rushed."

Here are a few things prospective buyers and sellers should know about the 2022 housing market forecast:

Read more about each housing market prediction in the sections below. If you're considering buying a home in 2022, visit Credible to see your estimated mortgage rate without impacting your credit score.


Competition will ease as new housing supply hits the market

The coronavirus pandemic had a tangible impact on the real estate market in 2021, with labor shortages and supply chain issues driving up the cost of new construction. But Yun predicts that some of these strains will be alleviated this year, resulting in more inventory being added to the market.

"Last year, we had too much demand and not enough supply, but in 2022 I suspect that things will move toward a more equilibrium state," Yun said.

In order to meet buyer demand, home builders have a "huge profit motive to build more," Yun added. More single-family homes are expected to hit the market this year, which will give buyers more flexibility and time to reflect on their home buying decision.

Yun expects inventory to begin showing up around February, with even more choices available by the spring. Although competition will settle down when more housing supply hits the market, he expects 2022 will still be a seller's market. 

If you find yourself in a bidding war when buying a home this year, being flexible with your closing date may help set your offer apart from the rest, Yun said. This gives the sellers more time to find a new home and get their mortgage ready during the closing process.

Another way to prepare for buying a home in 2022 is to get a mortgage preapproval letter to let real estate agents know you're serious. You can get prequalified for a mortgage for free on Credible.


Rising mortgage rates will alleviate demand

Interest rates on 30-year mortgages set record lows in January 2021 due to Federal Reserve economic policies that impacted the broader economy. But the Fed is predicting up to three interest rate hikes in 2022, which will cause mortgage rates to rise.

"We know that mortgage rates will be rising, but we don’t know when they will suddenly move," Yun said.

Rising mortgage rates may further ease buyer competition, although higher interest rates will pose new affordability challenges. In 2022, buyers can try to lock in a low mortgage rate when new inventory hits the market in the spring.

If you're considering buying a home in the next few months, now is a good opportunity to secure your mortgage rate before the Fed raises rates. You can compare rates across multiple mortgage lenders on the Credible marketplace without impacting your credit score.


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

Home value growth impacted affordability in 2021, but Yun expects home prices to rise at a more moderate pace in 2022 due to increased inventory. 

"I think home prices will continue to increase, but no longer at the double-digit rate of appreciation," Yun said.

He added that with a more balanced real estate market over the next year, home price growth should be more in line with consumer price inflation. Although buyers may not be able to get a bargain price on a house in 2022, they can take comfort in not having to rush before prices rise further.

Whether you're a seasoned homeowner or a first-time homebuyer, you can browse current mortgage rates in the table below and on Credible.


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