What Lies Ahead for Mortgage and Real Estate in 2022?

While the past two years have been far from predictable, that hasn't stopped the real estate and mortgage industry leaders from passing along their 2022 housing market predictions. 

Here's what the National Association of Realtors, Redfin, Realtor.com, and Housing Wire forecast for the 2022 real estate market. 

National Association of Realtors 
Three Takeaways from NAR's Chief Economist Lawrence Yun: 

Sales will remain strong: Yun predicts that home sales may decrease in 2022 compared to last year, yet still forecasts that home sales will outdo pre-pandemic levels. 

Interest rates will rise: Yun projects that mortgage interest rates will see an increase to 3.7% in the coming months. He attributes the projected increase in rates to persistent high inflation. 

Bidding wars will ease, slowing home price growth: "With more housing inventory to hit the market, the intense multiple offers will start to ease," Yun said. "Home prices will continue to rise but at a slower pace."

Redfin
Redfin Chief Economist Daryl Fairweather had several predictions for the 2021 housing market.
 Here are just a few:

Prediction #1: Mortgage rates will rise to 3.6%, bringing price growth down to earth
"We expect 30-year-fixed mortgage rates to rise slowly from around 3% to around 3.6% by the end of 2022, thanks to the pandemic subsiding and lingering inflation," said Fairweather

Prediction #2: New listings will hit a 10-year high, which will hardly make a dent in the ongoing supply shortage
"In 2022, new listings will surpass the 2018 high of 7.6 million homes, setting a new record going back to at least 2012," predicts Fairweather. With more homes on the market, homeowners will find it less daunting to list their homes while looking for a new one to buy, says Fairweather. 

Prediction #3: Rents will increase by 7%
Rents will increase 7% by the end of 2022, more than double the predicted year-over-year growth in home prices of 3%, says Fairweather. 

"Demand for rentals will be strong for several reasons," he said. "The end of mortgage forbearance will cause many homeowners to sell and rent instead. As the pandemic subsides, more people will choose to live in cities where it is more common to rent. Additionally, the strong labor market will cause more people to move to a new city, and many movers will want to rent so they can get to know their new city before they buy."

Realtor.com 2022 Predictions

Home Sales: Hit 16-year Highs
"At a national level, we expect to see continued home sales growth in 2022 of 6.6%, which will mean 16-year highs for sales nationwide and in many metro areas." 

Home Prices: Advance at a More Moderate Pace, but Continue to Set Records 
"Looking ahead, with economic growth expected to sustain the purchasing power of eager homebuyers, we expect the median home sales price to continue to increase, rising 2.9% in 2022, a notably more moderate pace."

For-Sale Inventory: Begins to Turn Around
"With homes selling and continuing to do so quickly, inventory will remain limited, but we expect to see the market rebound from 2021 lows. Inventory is expected to grow 0.3% on average in 2022. While buyers have been eager in the last 2 years, sellers have been on and off. A rising share of homeowners this fall reported planning to sell a home in the next 12 months could signal an improvement in this trend that has been a major challenge for the housing market."

Rents: Expected to Outpace Home Price Growth
"At a national level, we forecast rent growth of 7.1% in the next 12 months, somewhat ahead of home price growth as rents continue to rebound from slower growth earlier in the pandemic."
Notable Trends to look for in 2022: 

•    Buyers still prefer the suburbs
•    Remote, in-office, or hybrid? The future of work brings flexibility for buyers
•    Searchers dream big, but budget realities and for-sale availabilities might mean smaller homes prevail
•    Hispanic homebuyers are a growing demographic
•    The market still tough for first-time homebuyers, although 2022 looks promising

Top Predictions from Mike Simonsen for Housing Wire 
 
•    Demand will continue strong into 2022- The Demand for homes in December was strong, with homes sitting on the market for a median of 49 days, compared to a market time of 85-100 days in a typical December. This is a sign that Demand will remain high in 2022, according to Housing Wire's Simonsen, who predicts that the market will hit a low of 21 days in April of 2022. 
 
•    Low inventory will continue as well- Normal inventory is declining faster than usual, and statistics indicate that 2022 will start with record lows of available inventory. However, Simonsen predicts that inventory will begin to grow in February, increasing strength throughout the year. 
 
•    Housing prices will remain high- We all know by now that high Demand and low inventory lead to higher prices. With Demand showing no signs of cooling, Simonsen expects prices to remain high in 2022. However, interest rates could affect this. He says, "If interest rates start rising, and we're seeing inflation or other economic challenges, this could have a cooling effect on the market."