Anyone who has bought a house last year (or tried to) knows how hot the market has been. But as we head into 2022, the housing market may — finally — be starting to cool.
Let’s recap, briefly, how we got here.
A record-low supply of homes for sale and near record-low mortgage rates have propelled U.S. homes prices to an all-time high. The median sales price of a single-family existing home jumped about 23% in the third quarter of 2021, hitting $363,700, according to the National Association of Realtors’ quarterly report. Those rising home prices forced buyers to duke it out for a limited number of homes.
Fortunately for buyers, the market is starting to shift. Although home prices increased in the third quarter, only 78% of 183 markets measured by NAR saw double-digit year-over-year price gains, down from 94% in the prior quarter.
The number of bidding wars has also tapered off, Redfin data shows. Meanwhile, construction of new homes is picking up and bringing some much-needed supply to the market, says Robert Dietz, chief economist at the National Association of Home Builders.
Donna Deaton, a real estate agent at RE/MAX in Cincinnati, agrees that the market is tilting in a buyer’s favor. “We’re still seeing multiple offers in a lot of cases, but what we’re not seeing is 40 to 50 offers per property anymore,” Deaton says.
Here’s what’s in store for the housing market this winter — and tips for home buyers on how to navigate the new landscape.
Mortgage rates are expected to tick up
Mortgage rates have been rising, with the average rates on a 30-year fixed-rate mortgage increasing from 2.86% in mid-September to 3.05% by late December, according to Freddie Mac’s weekly report.
Joel Kan, an economist and industry analyst at the Mortgage Bankers Association, projects rates will continue to go up this winter. “Rates may fluctuate between now and March on a weekly basis due to volatility factors like the Omicron variant, but we expect an upward movement overall,” he says.
According to the MBA’s projections, 30-year rates will climb to 3.3% by the end of the first quarter of 2022. That’s in line with Realtor.com’s forecast, which predicts mortgage rates to close the first quarter at around 3.25%.
Kan encourages homebuyers who’ve been sitting on the sidelines to strike this winter. “Our forecast sheet has 30-year rates rising to 3.5% at the end of the second quarter and 4.0% at the end of next year, so I wouldn’t hold out,” he says.
Deaton agrees. “With interest rates as low as they are right now, you can afford to buy a little bit more house than you’d …….