The housing market has been on quite a wild ride over the past couple of years…….which has been great for homeowners, but rather challenging for homebuyers.

The market is finally running out of gas and it’s safe to say the frenzy is over. Check out last week’s blog post to learn more.

This week, we turn our attention toward the second half of 2022 and what to expect in the housing market.

Watch the following video, or continue reading below, to learn more.

The challenge with making predictions is that they are often wrong!

Go back a couple of years when we were in the midst of Covid lockdowns and the majority of the predictions out there about the housing market were not good. The market was going to crash, there would be a tsunami of foreclosures, and it would be worse than 2008.

While I didn’t predict a housing crisis (just sayin’😎) I didn’t predict the housing market would go on an unprecedented run either. I don’t recall anyone predicting that. The work from home dynamic took off and changed not only the definition of home but where home could be.

There’s no doubt the rise in home prices over the past couple of years, and mortgage rates over the past few months, have caused some buyers to take a step back and exit the market.

Will mortgage rates and home prices continue to rise? Should you wait for things to settle down? While only you can make the decision that’s best for you, here is what the experts are predicting for mortgage rates, home sales, and home prices for the remainder of this year and into 2023.

Mortgage Rates

Initially, when mortgage rates started to rise, there was an increase in activity as homebuyers rushed to lock in before rates and home prices went even higher. Now, we are starting to see less buyer demand as many have adopted a wait-and-see approach. Buyer sentiment is at its lowest level in over two years as there is increasing concern over where the housing market and economy are heading.

With regard to mortgage rates, here’s what Mike Fratantoni, Chief Economist, Mortgage Bankers Association had to say recently;

The mortgage markets do their best to factor future economic conditions into current rate pricing. As such, much of what is anticipated has already been accounted for and rates are expected to level off.

You can see evidence of that by looking at the change in mortgage rates from the beginning of the year. The plateau that Mike is referring to can be seen on the right hand side of this graph;

While mortgage rates were on an upward trajectory through the third week of April, they have essentially leveled off since then.

I’ve heard predictions that rates will hold around 5.5% and also seen predictions that rates could drop back into the high 4’s by early next year. I wouldn’t hold my breath for 3% mortgage rates again anytime in the foreseeable future.

If it’s been a few months since you were pre-approved, I would suggest getting back in touch with your lender to see how mortgage rate changes have impacted the amount you are pre-approved for. A 1% increase in mortgage rates generally decreases the amount of your pre-approval by 10%. If you haven’t discussed your home buying plans with a lender or would like to get pre-approved, please reach out and we’d be happy to connect you with our preferred lending partner.

Home Sales

There have been multiple reports in the media about declining home sales. “As Mortgage Rates Rise, Home Sales Continue to Fall” or something along those lines.

The challenge with headlines and reports like these is that, without context, they create a sense of fear and anxiety.

“Airplane slows and begins falling from the sky.” Sounds terrifying, doesn’t it? Not so bad if you knew it was because the plane coming in to land.

The bottom line is it’s important to have some perspective. Are home sales lower than they were last year? Yes, but keep in mind that 2021 was a record year for home sales as shown on the following graph;

While home sales, as of April, were trending lower than last year, they were still on pace to exceed the number of sales experienced in 2017, 2018, and 2019, all of which were very strong years in the housing market.

Now that more inventory is coming to market, and mortgage rates are holding steady, there are several predictions that total home sales in 2022 could actually end up exceeding the number we had in 2021.

Home Prices

Even though mortgage rates have climbed and demand has softened, home prices have continued to rise due to the large imbalance between supply and demand.

The experts believe home prices will continue to grow but at a decelerating rate. A recent article in Fortune Magazine stated;

“….the swift move up in mortgage rates doesn’t….doesn’t mean home prices are about to crash. In fact, every major real estate firm with a publicly released forecast model….still predicts home prices will climb further this year.”

Changes in home price appreciation will vary from market to market. While some markets are expected to see more price softening than others, none are expected to see major declines. Nationally, some researchers are predicting home prices could go flat while all believe the days of double-digit price growth will soon be behind us.

Here in Frisco, TX home price appreciation is expected to moderate but continue through 2027 based upon continued population growth.

Bottom Line

The market is most definitely shifting and presenting more opportunities for buyers. Sellers can still command a premium for their homes but need to be careful not to price their home ahead of the market. If it’s time to have a more detailed discussion about your buying or selling plans in this changing market please give us a call at 469-296-5230 or email Contact@S2RealEstateTeam.com