Woman realtor walking through doorway into a house.

2022 Housing Market Predictions: What To Expect

4-Minute Read
Published on December 6, 2021

Anyone keeping an eye on the real estate market watched for predictions in 2021. Along with the pandemic, 2020 brought a chaotic whirlwind for the housing market. Mortgage rates dropped down to record lows that carried through much of 2021. In addition, home values and sales skyrocketed. So, it’s no wonder that a year like that left experts and new buyers guessing. What can you expect moving forward? Will the housing market slow down?

While 2021 saw small steps toward normalcy, it by no means experienced a cool down. Buyer demand continued. In combination with low housing inventory and labor shortages, that drove up selling prices.

Here are a few housing market predictions for 2022 to help you prepare for the market’s future.

Take the first step toward buying a house.

Get approved to see what you qualify for.

Start My Approval

Demand And Prices Remain High

Despite the economic lull during the early months of the pandemic, the current U.S. real estate market is hot. The industry already faced housing supply constraints before COVID-19 hit. But that only increased demand as stay-at-home orders reiterated the need for a home that was the right fit. With a larger portion of the population working from their home, prospective buyers could move toward more suburban areas. Some sought out properties that could support home offices, while others simply didn’t want to miss out on the low mortgage rates.

For anyone interested in buying a home, real estate is still in high demand. And this trend will likely continue, and grow, into the year 2022. These conditions make a seller’s market, meaning the seller has the upper hand. Demand is high, and supply is still low, so they can set prices higher, too.

Unfortunately for the millennials entering the real estate market as first-time home buyers, this puts them at a disadvantage. While there is the draw of low-mortgage rates, factors like high home prices, labor shortages and building material shortages are boxing them out of the market.

Getting a house is still possible, but you might want to make a list of what you absolutely need and what would just be nice to have so you can find something in line with your budget.

Home Inventory Will Slowly Rise

During the past year, buyers faced a limited housing inventory which put sellers at an advantage. Compared to 2020, the national inventory declined by 22.2% in active listings, according to Realtor.com’s data. The drop in active listings looks even more drastic against 2019’s inventory. Since then, active listings have decreased by 52.5%.

However, industry experts project an increase in existing home listings next year. Some even see investors taking advantage of the high home prices and selling off rental properties. Despite this, the growth in inventory will be slow and likely still pose a challenge to buyers. It may take a few years before the shortage begins to normalize. Until then, there is still the issue of disrupted supply chains along with labor shortages. As of Q3, 93% of contractors surveyed for the U.S. Chamber of Commerce Commercial Construction Index (CCI) face at least one material shortage, with steel, lumber and insulation the top-cited. Thus, affecting the rate contractors can build new homes.

On the other hand, the smaller housing inventory helps sellers. Low inventory creates competition among buyers, boosting the home value of sellers’ properties. To see where the inventory currently stands, try calculating the housing inventory yourself.

It’s worth noting that one area in which the market may be coming to more of a balance is in new construction. Despite labor and material challenges, there was 6.3 months’ worth of supply at the current pace of sales, according to the most recent data from the U.S. Census Bureau. A market is considered in equilibrium at about 6 months of supply. Further, prices may have room to come down as sales are down 23.1% from last year.

Home Appreciation Rates Continue To Increase

Home price appreciation isn’t always a given, but current economic trends look promising. Based on CoreLogic’s latest Home Price Index, home prices are experiencing a 19% increase year-over-year. That’s across all price ranges: low, low-to-middle, middle-to-moderate, and high. However, not every area saw the same level of appreciation. The CoreLogic HPI also found appreciation was the strongest in the west.

The balance between supply and demand determines the growth of housing prices. Supply shortages will likely continue into 2022, accompanied by high demand, so experts predict prices to continue increasing as well. Fannie Mae and Freddie Mac forecast home price appreciation of 5.1% and 5.3%, respectively, in the 2022 year. Home prices will still steadily increase, but not likely at the 2021 pace.

Interest Rates Will Rise

There were record low mortgage interest rates during 2021. However, those rates may rise in the upcoming year, affecting affordability.

Freddie Mac’s Quarterly Forecast study predicts that mortgage rates will steadily rise through to the end of next year. By the end of the fourth quarter in 2022, the government-sponsored corporation forecasts average rates of 3.8%. That is a 0.7% difference compared to the 30-Yr FRM average of 3.1%, as of November 2021.

That increase in interest rates will impact affordability, rising the monthly cost of homeownership at all home price points.

The Bottom Line

While we’ll likely see several trends from 2021’s housing market continue in 2022, some things will be different. Mostly, 2022 will be a year of steady growth, although slower compared to the previous 2 years. In addition, the market will probably stay tilted toward sellers for now. This is due to the projected levels of buyer demand combined with limited supply.

But things can always change. As we all know now, current events impact the real estate market and economy. Plus, the market isn’t stagnant; it fluctuates over time. Of course, one of the key reasons to follow this is to see how the trends affect what you’re going to pay. For home buyers, interest rates are a big key. Check out how mortgage rates are determined by a mix of market forces and your personal financial characteristics.

If you’re interested in buying a home or refinancing your current mortgage, you can apply online or give us a call at (833) 326-6018.


Take the first step toward buying a house.

Get approved to see what you qualify for.

Start My Approval

Holly Shuffett

Holly Shuffett is a staff writer who writes with a focus on homeownership and personal finance. She has a B.A. in public relations from Oakland University and enjoys creative writing and reading in her free time.