How will the changes that have taken place in the housing market over the past few months impact mortgage rates and home prices for the remainder of 2022 and beyond?

Despite all the talk about a crash, the housing market has actually shown itself to be quite resilient. Will this continue or are there storm clouds on the horizon?

The experts have weighed in and released their latest forecasts.

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

It seems that everyone these days has an opinion about the housing market (and just about everything else😀)

If you’re familiar with my blog posts then you’ll know that I prefer to share insights based on the data rather than an opinion based on speculation.

There are a lot of year-over-year comparisons being used to support the idea that the housing market is beginning to crash, but are those really a good indication?

We all know the housing market has been on absolute fire for much of the past two years, despite the predictions of a pandemic-driven housing market crash, so saying that sales and activity are down year-over-year when last year was an all-time record year is a bit misleading.

Foreclosure starts are up 300%……yes they are…. because a moratorium was in place last year. Current foreclosure activity is actually at a record low.

Headlines can be spun however you want them to be and seem to do more to spread fear than share facts.

The pandemic era of real estate where ultra-low mortgage rates fueled demand against record low supply causing home prices to increase rapidly is behind us.

Currently, the data is telling us the housing market is returning to normal. Although inventory has been going up rapidly, the curve has started to flatten and the total number of homes for sale is still 40% lower than pre-pandemic levels.

Mortgage Rates

If you’re hoping for a return to mortgage rates below 3% I think you might be waiting for a very long time.

The rapid rise in mortgage rates through the spring was certainly a shock to the system and did cause buyers to either pause or priced them out of the market causing a drop in demand.

Rates have recently fallen back below 5% and here is where the experts believe mortgage rates will be over the next year;

Many of the mortgage bankers I have spoken to believe that rates will eventually settle between 4.5% and 5% by the end of next year, which is pretty close to the projections above, and don’t see them going much lower than that for the foreseeable future.

Home Prices

Yes, we are seeing price reductions in most markets, but if you’re waiting, or hoping, for home prices to fall 25% to 30% it doesn’t look like anything close to that is going to happen.

As mentioned above, supply is still low relative to demand which is keeping prices strong, but the pace of appreciation is coming down and is expected to continue falling.

Part of the increase in supply we have seen recently has been from sellers who rushed to put their homes on the market hoping to catch the end of the frenzy. After being on the market for a few weeks with no offers some of those sellers are deciding to stay put and take their homes off the market.

Other sellers, who may have wanted to move, but not necessarily needed to move, are contemplating if it’s worth selling their home with a 3% mortgage rate to buy a new home at a 5% mortgage rate.

Here is the latest expert forecast of national home price appreciation for 2022;

The 10.3% average of all projections is still a very strong pace of appreciation, but certainly lower than the 20%+ we saw over the past year.

Here in Frisco, Zillow is currently forecasting 11.5% home price appreciation over the next year.

Mark Zandi, Chief Economist at Moody’s and generally quite conservative in his forecasts recently had this to say;

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Bottom Line

The dynamics of every market are different and as the housing market returns to normal, market conditions will vary from city to city and neighborhood to neighborhood.

Some markets are likely to see price declines while others will see continued appreciation.

If you’d like to stay up to date on what is happening in your local market the best way to do that is through our Weekly Market Reports. With these reports, you can see the latest market trends for any city/zip code in the country.

From the Frisco Market Report use the search bar at the top to look up current conditions for the city/zip code of your choice.

If you have additional questions, or a specific situation you would like to discuss in more detail, please give us a call at 469-296-5230 or email Contact@S2RealEstateTeam.com