As we enter the second week of November the expert forecasts for the 2022 housing market are starting to be released. Are we in for a repeat of 2021 or can we expect the housing market to change as the calendar rolls over to 2022?

As I shared in last week’s blog post, we shouldn’t expect to see any sort of a housing market crash in 2022, but changes in mortgage rates and home price appreciation are expected. To find out what those are, watch the following video, or continue reading below.

There’s a lot of misinformation out there about the housing market right now. The headlines seem to do more to confuse than to clarify and, like with most things. everybody’s got an opinion.

Although I do share insights and thoughts in these blog posts, my goal isn’t to convince you of anything but to share the latest data and information so that you can make the best decision for you and your family.

Mortgage rates and home prices are the focus of today’s blog as they’re both major players in the housing market and influence people’s decision to buy or sell a home.

Mortgage Rates

Mortgage rates have already started to rise, which isn’t necessarily a bad thing as I will explain a little later, and are expected to continue rising throughout 2022.

The consensus of all the forecasts indicates that we should expect mortgage rates to be about 3.5% by this time next year. While this is higher than we’ve been used to it’s important to remember that rates in the 3’s, and even 4’s, are not high from a historical perspective.

Here’s a look at what mortgage rates have been since January 2018;

In November 2018 mortgage rates reached 5% before trending down to the historical low of 2.65% we saw at the beginning of this year.

While mortgage rates are currently trending upward, that’s not necessarily a bad thing as I mentioned above. Ultra-low mortgage rates, which have helped with affordability, have also played a part in increased demand. This increased demand, coupled with falling supply, helped create the environment that led to rapidly increasing home prices, multiple offers, and the bidding wars we have been seeing for the majority of this year. The market that we have been in is clearly unsustainable and rising mortgage rates will be one of the factors that helps cool things off a little.

Home Prices

As mortgage rates fell home prices soared. Rapid home price appreciation hasn’t been confined to a few markets but has been experienced across the entire country. Here’s a look at home price appreciation in the two markets that my team operates in currently.

Frisco and Prosper, TX

From the graph above for Frisco (blue line) and Prosper (red line), you can see that home prices were appreciating at a consistent pace from January 2018 until January 2021. You might recall from previous blog posts that we didn’t start seeing the crazy market and bidding wars here locally until February 2021. Home prices went on a very steep upward trajectory starting in February. Notice that the pace of appreciation started to flatten out again about 3 months ago. Nevertheless, as of October, year-over-year median home prices are up 27.3% in Frisco and 29% in Prosper.

Temecula and Murrieta, CA

Southern CA, whose housing market often shows trends ahead of other parts of the country, had a similar pattern of consistent appreciation from January 2018, but unlike here in North Texas, prices started to soar in early 2020 instead of early 2021. Although the pace of appreciation has shown signs of moderating over the past couple of months, it isn’t as pronounced as what we have seen in Frisco and Prosper. This could be due to the fact that the Southern CA market doesn’t experience the same level of seasonal slowdown that the TX market does.

What’s interesting is year-over-year median home price increases are similar between the two states with Temecula (blue line) having 27.8% appreciation and Murrieta (red line) 23.2%,

Regardless of what market you are in it’s obvious that homes cannot continue to appreciate at 20% plus year-over-year. Historically low mortgage rates can only help with affordability for so long.

As mentioned above, while mortgage rates are not expected to increase dramatically, rising rates coupled with increased supply, especially from new construction, are expected to slow the pace of appreciation going forward. I did say slow and not stop! The latest projections I have seen show home prices continuing to appreciate through 2025.

For 2022, here’s the latest home price appreciation estimates;

The 5.1% average of all the estimates is a national estimate. I do expect that prices in North TX and Southern CA will appreciation more than that, but nowhere near the pace we saw this past year. I wouldn’t be surprised to see both markets finish 2022 with appreciation of approximately 10%.

Overall, as Mike Fratantoni, Chief Economist and Senior Vice President of the Mortgage Bankers Association had to say;

Bottom Line

The frustrating conditions buyers have experienced with multiple offers and bidding wars should ease, but the fundamentals of the housing market are expected to remain strong.

Want to keep track of the local housing market? Click below to view the Market Report of most interest to you. Alternatively, you can search any city or zip code in the country bu clicking on any of the reports.

Frisco Market Report

Prosper Market Report

Temecula Market Report

Murrieta Market Report

If you have additional questions, or a specific situation you’d like to discuss in more detail, please don’t hesitate to reach out at 888-447-9650.