Housing Market Forecast 2022, 2023, 2034, 2025
What are the housing market predictions for the next 5 years? This appears to be a question that is asked quite regularly these days. Everybody is talking about housing predictions, but how is the market doing? Is the housing market ascending or is it on the decline? If you're wondering how the housing market will fare over the next few years, especially if you're an investor, there's some good news for you.
In light of what real estate professionals are forecasting, these are some educated predictions about what the future of the US housing market will look like. Despite these early signs of a slowing market, it remains as hot as ever for homebuyers, with new records set for home-selling speeds and price increases. Home prices are rising due to a mismatch between supply and demand, but this is not a housing bubble.
Many experts predicted that the pandemic would cause a housing crash on par with the Great Depression. That, however, is not going to happen. The market is in far better shape today than it was a decade ago. The housing industry has had a boom last year, with the largest annual gain in single-family house values and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years.
In 2006, lending criteria were significantly loosened, and little examination was done to determine whether or not a borrower had the ability to repay their loan. These days, the requirements are more stringent, which lowers the risk for both the lenders and the borrowers. The government and jumbo segments had the most significant tightening in the previous month. These two housing markets couldn't be more different from one another, and the current situation is in no way comparable to that of the past.
The Mortgage Credit Availability Index (MCAI) is an index that is released on a regular basis throughout the year by the Mortgage Bankers Association (MBA). This index is used to measure how simple it is to get a mortgage. The higher the index is, the more options there are for obtaining mortgage finance. In 2004, the index was hovering around the 400 mark.
As the housing market heated up, mortgage loans became more available, and then in 2006, the index surpassed 850. The mortgage credit availability index (MCAI) fell as a result of the fall in the real estate market since it became nearly hard to get mortgage financing. Since then, thankfully, the conditions for lending have been relaxed a little bit, although the index is still rather low. The index had a reading of 120.0 in May, which is around one-seventh of what it had been in 2006. It remains more than 30 percent below pre-pandemic levels.
Because there aren't as many options on the housing market, a lot of people in the United States are having a hard time finding the house of their dreams. Communities all around the country are struggling because of low inventories. Over the past decade, chronic underbuilding and the influx of millions of millennials into the homebuying market have resulted in a major mismatch in housing supply and demand. Despite the fact that mortgage rates are skyrocketing, the housing market is not going to crash any time soon. The most likely effect is a slower rate of appreciation.
Housing Market Predictions 2022
The updated housing market forecast by Realtor.com® has been released as a mid-year update. After more than a year of skyrocketing demand, and skyrocketing home prices, the housing market appears to be cooling off. The housing market is not collapsing, but it is heading towards more balanced conditions from an unsustainable peak of last year.
This year, mortgage rates have risen by more than two and a half percentage points. Furthermore, the increasing expenses of purchasing a home have altered many prospective purchasers' calculations. As a result, year-over-year house sales have fallen in recent months. A record 79 percent of respondents in a Fannie Mae study on homebuyer sentiment indicated it's a poor time to buy a home.
Home sales activity kicked out 2022 stronger than anticipated, but rising costs have led to alter their forecast downward. Realtor.com now forecasts a 6.7% decline in house sales in 2022. They anticipate the greatest year-over-year decline in house sales at the customary peak of the summer selling season. Home sales on par with these predictions would mean that 2022 sales are the 2nd highest tally since 2007, trailing only 2021.
Sales of existing homes have declined 8.6% year-over-year in May 2022. Declining home purchases means more people are renting. First-time buyers were responsible for 27% of sales in May, down from 28% in April and down from 31% in May 2021. Affordability has been hit with a triple whammy of rising interest rates, fast house price increase, and inadequate supply.
In the second half of 2022, house price growth will moderate, although it has been hotter for longer than anticipated, resulting in an upwardly revised forecast of a 6.6% home price rise for 2022. That's an increase from their previous forecast of 2.2% growth in home prices. More than a decade of chronic underbuilding, coupled with millions of millennials entering the homebuying stage of life, has resulted in a major mismatch in housing supply and demand in the United States.
Therefore, don't forecast a halt in home price rise despite the fact that mortgage rates are rising significantly. While housing costs remain high, forcing homebuyers to make difficult decisions, it is predicted that the number of properties for sale will continue to increase, building on the reversal that began in May 2022. That is a sign of relief for first-time home buyers. Following a spate of volatility this week, the average rate on 30-year mortgages climbed to 5.78 percent from 5.36 percent the previous week, according to Bankrate’s national survey of large lenders.
Inventory has begun to shift in a different direction
Active listings increased 13 percent year over year in the most recent week. Increasing housing inventory is excellent news for buyers. Homebuyers will have additional options as a greater number of homeowners want to adapt their living situations to changing personal demands and take advantage of favorable market circumstances to access the substantial wealth they have accrued. Homeowners continue to be in a favorable position, particularly those who have owned for extended periods of time and amassed substantial wealth.
This is forecasted to attract additional sellers looking to capitalize on favorable market circumstances, resulting in increased competition and a rebalancing of the housing market away from its previous seller-friendly bias. This bodes well for seller-buyers who have been disappointed by the scarcity of purchasing possibilities.
- The median sales price appreciation prediction for existing homes has increased from 2.9% to 6.6% for 2022.
- The prediction for existing home sales has shifted from positive growth of 6.6% to an annual fall of 6.7%.
- The forecast for inventory growth of existing homes for sale has increased from 0.3% to 15%.
- Mortgage rates have been revised upward to reflect the major shift in monetary policy and financial conditions over the last 6 months.
- In the second half of 2022, housing finance rates are predicted to climb at a more modest pace, which means that rates may hit 5.5% by year-end.
- As mortgage rates have increased, prospective homeowners have submitted fewer loan applications.
- According to the Mortgage Bankers Association, mortgage purchase applications decreased by 16 percent (in the week ending June 10) compared to the same week last year.
- With mortgage rates, well above 5 percent, refinancing activity, which was brisk during the epidemic when rates were at an all-time low, has dwindled by more than 70 percent compared to last year.
The national median listing price for active listings in May was $447,000, up 17.6% from the previous year and up 35.4% from May 2020. In large metropolitan areas, the median listing price increased by 13% year over year. A rise in listing prices indicates strong demand and/or constrained supply. According to Realtor.com, this growth rate in asking prices could also partially be attributed to an increasing share of newly listed larger homes and sellers not yet adjusting to market conditions.
Moreover, there are housing market predictions that this adjustment is begun to take place. The percentage of properties with lowered prices climbed from 6.2% in May 2017 to 10.5% in May 2018 but is still 6.2% below the average for the years 2017 to 2019. In May, the percentage of price reductions increased in 49 of the 50 major metropolitan areas, up from 40 the previous month. Austin homes showed the greatest growth in the share of homes with price reductions compared to last year (+14.7 percentage points), followed by Las Vegas (+12.3 percentage points) and Phoenix (+11.6 percentage points).
Will The Housing Market Crash in 2022?
The overarching question is will the housing market crash or when, exactly, between 2022 and 2025? The simple answer is that it will not crash anytime soon? Rising rates aren’t cooling the market as some expected. The current trends and the forecast for the next 12 to 24 months clearly show that most likely the housing market is expected to stay robust, with many of the trends that propelled real estate to new heights last year remaining firmly in place this year as well.
In recent years, the price of homes has climbed dramatically. Many prospective buyers, especially those with limited financial resources, are eager to hear whether and when home prices will become more accessible. Here is when housing market prices are going to crash. While this may appear to be an oversimplification, this is how markets operate.
When demand is satisfied, prices fall. In many housing markets, there is an extreme demand for properties at the moment, and there simply aren't enough homes to sell to prospective buyers. Home construction has been increasing in recent years, but they are so far behind to catch up. Thus, to see significant declines in home prices, we would need to see significant declines in buyer demand.
Demand declines primarily as a result of rising interest rates or a slowing economy in general. Ultimately, for rising interest rates to destroy home values, we'd need substantially less demand and far more housing supply than we presently have. Even if price growth moderates this year, it is extremely improbable that home prices will crash.
Thus, there will be no crash in home prices in 2022; rather, there will be a pullback, which is normal for any asset class. The home price growth in the United States is forecasted to just “moderate” or slow down in 2022 and 2023. Ultimately, for rising interest rates to destroy home values, we'd need substantially less demand and far more housing supply than we presently have. Even if price growth moderates this year, it is extremely improbable that home prices will crash.
Mortgage rates are expected to increase somewhat but stay historically low, home sales will reach a 16-year high, and price and rent growth will drop significantly compared to 2021. Affordability will be a concern for many, as home prices will continue to rise, if at a slower pace than the previous year. With 10 years having now passed since the Great Recession, the U.S. has been on the longest period of continued economic expansion on record.
The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy. However, hot economies eventually cool and with that, hot housing markets move more towards balance. Housing market forecasts are essentially informed guesses based on existing patterns. While the real estate pace of last year appears to be reverting to seasonality as we approach 2022, demand is not waning.
Increasing interest rates will almost certainly have a greater impact on the national housing market in the early months of 2022 than any other factor. While sellers remain in an advantageous position, price stability and the continuation of competitive interest rates may provide some much-needed relief to buyers this year. Housing supply is and will likely remain a challenge for some time as labor and material shortages, as well as general supply chain issues, delay new construction.
The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply. Economic activities are ramping up in all sectors, mortgage rates are rising, and jobs are also recovering. The housing market remains largely a seller's market due to demand still outpacing supply. The inventory of available houses continues to be a constraint on both buyers and sellers.
Forecasting home price appreciation is a challenging task. While inventory has increased slightly, it remains significantly below pre-pandemic levels and is simply unable to meet current demand. Tight supply following years of underbuilding, combined with increased demand due to remote work, and US demographics — will continue to be a factor in 2022 & 2023. It will continue to be a seller's real estate market in 2022. Expect to see bidding wars on several houses, especially as the spring and summer shopping seasons approach.
Housing Market Predictions 2023 & 2024
Here's what some other experts predict will happen in the housing market in the coming months and years. Despite declining buyers' optimism that now is a good time to buy a house, the number of households interested in becoming homeowners remains high. This is especially true for younger homebuyers, who are likely first-time buyers and are struggling to save for a down payment as rents continue to reach record highs.
Simultaneously, seller expectations for larger down payments appear to be increasing, fueled by a still-competitive housing market and repeat buyers with relatively more available equity. The housing market is unlikely to shift from a seller's to a buyer's market anytime soon. Rising mortgage rates may take some of the steam out of the market, allowing inventory to rise slightly. It would also slow the rate of home price appreciation and reduce the possibility of a red-hot housing market resulting in an overheated market.
The supply of available homes is so low that even a significant drop in demand due to higher interest rates will not turn this into a buyer's real estate market, according to industry experts. Because there are not enough houses available to meet demand, home prices will continue to rise, but the combination of rising home prices and elevated mortgage rates means fewer people will be able to afford to buy.
There would still be continuous price appreciation, scarcity of inventory, and good demand. Some markets will experience lower appreciation rates than others, with the Sunbelt performing particularly well. Home prices do not appear to be decreasing, even in some of the country's most expensive markets, the tier one markets. For example, according to CoreLogic, these large cities continued to experience price increases in February, with Phoenix on top at 30.4% year over year. The second rank was held by Las Vegas with 26.5% year-over-year price growth followed by San Diego (25.2%).
Now that mortgage rates have reached the 6 percent barrier, a worldwide research firm, Capital Economics, predicts that the U.S. house price rise will likely slow in 2023, not this year. Capital Economics forecasted that the U.S. housing market will experience a 5 percent decrease in house price growth by mid-2023, followed by a “gradual rebound” to a 3 percent annual price rise by the end of 2024. It's a major analysis that arrives as the U.S. housing market begins to shift, with increasing mortgage rates pricing out or discouraging potential homeowners.
However, the firm does not forecast a spectacular “price decline” or a housing bubble bust similar to that of 2006, which precipitated the global financial crisis and the Great Recession. A 5 percent fall would definitely constitute a price decrease, but it would not cause home prices to spiral out of control. Keep in mind that house prices have risen steadily for several years and surged significantly during the COVID-19 epidemic.
A price drop is noteworthy, but in the grand scheme of things, it is rather little. Prior to the housing bubble of 2006, the U.S. housing market was primarily supported by exceedingly risky bank lending methods that produced a synthetic demand for housing, allowing those who could not afford to retain their homes to acquire them. According to analysts, today's market does not have the same circumstances.
According to analysts, today's market does not have the same circumstances. Capital Economic forecasts that mortgage rates would increase to 6.5 percent by 2023. According to Matthew Pointon, a senior property economist at Capital Economics, if home price growth follows our earlier predictions and declines to zero by mid-2023, mortgage payments would remain above their mid-2000s peak until mid-2023.
“That looks unsustainable and house prices are therefore set to fall. However, our previous point about a lack of forced sellers remains. Therefore, we expect lower home demand to lead to a relatively small fall in house prices, with annual growth dropping to -5% (year over year) by mid-2023,” Pointon added. “That would bring the mortgage payment burden back under the mid-2000s level by the start of 2023.”
When Will the Housing Market Crash Again: 2023, 2024, or 2025?
The housing market will not crash in 2023, 2024, or 2025. Let's look at what experts forecast regarding the US housing market through at least 2023, and you'll get a better idea of what to expect. Most of them say that prices aren’t likely to drop in the near future.
The housing market is coming off a year in which home prices in the United States increased by an unsustainable 18.8%. Will the market continue to grow at this rate or will it be a little less frenetic this year? The housing market is even tighter now than it was prior to the spring 2021 housing frenzy. The lack of inventory and decade-high interest rates likely weighed heavily on the minds of prospective buyers in April.
An already challenging market with limited inventory and record price growth has become even more unfavorable for homebuyers as a result of an unprecedented interest rate increase. Even industry titans like Zillow decreased their bullishness in May, decreasing their projected home price growth rate from 20.9% to 11.6% growth through April 2023.
According to another study by Zillow, the total value of private residential real estate in the United States increased by a record $6.9 trillion in 2021, to $43.4 trillion. Since the lows of the post-recession market and the corresponding building slump, the value of housing in the United States has more than doubled. The most expensive third of homes account for more than 60% of the total market value. The market value hit the $40 trillion mark in June of last year and since has been gaining an average of more than half a trillion dollars per month.
One of the most widely held housing market predictions for 2022 & 2023 is that inventory will remain scarce but price appreciation will be slower than it was in the last two years. While spring and summer will likely see an increase in listings, it is unlikely that there will be enough to meet demand. The housing market has been particularly robust in the pandemic, with high demand for homes in almost every area of the nation. The same trend will follow from 2022 to 2023.
The shortage of inventory has created a red-hot housing market, with homes selling within hours of being listed, frequently for well over the asking price. According to many housing experts, buyers can predict similar trends this year to those seen over the last two years: increased prices, low inventory, and quick turnaround.
However, some significant hurdles are approaching the US housing market. Most experts had predicted mortgage rates for housing to rise this year. The cost of borrowing money through mortgages has been steadily increasing this year. Most experts predicted that mortgage rates would climb this year, but they did so more quickly than expected, averaging more than 4% for 30-year fixed-rate mortgages in mid-February. Around mid-April, it surged to 5.28 percent, the highest level since April 2010, and the uptick continues.
Monthly affordability will suffer as interest rates rise, but we'll also lose more of the investment-type buyers looking for once-in-a-lifetime leverage. As a result, rising interest rates may also imply a more stable market. With rates that low in 2021, all kinds of buyers rushed in, and with little housing supply to match, price rise has been ferocious.
This also emphasizes affordability. The basics of housing needs would still continue to drive primary purchases forward. It's a good thing that the housing market will be less heated in 2022 and 2023. Let's take a closer look at why the housing market is showing some signs of a slowdown in 2022 & beyond.
Fannie Mae predicts that a double-digit home price rise will continue until the middle of 2022. Still, it won't be until 2023 that home value appreciation recovers to the pre-pandemic rate of 5%. Based on this, prospective investors may be pessimistic about the 2023 market. While prices are not expected to fall, Fannie Mae anticipates that price growth will be slower than usual in 2023. A slowing in the home price appreciation and possibly increased inventory could help avoid a real estate market disaster in 2023.
As of April 2022, government-sponsored enterprise anticipates a slowing housing market over their projected horizon. Mortgage rates have hiked up considerably in recent months, and such large moves have typically resulted in a housing slowdown. As a result, they forecast a slowdown in home sales, house prices, and mortgage volume during the next two years. They anticipate that the house price rise will slow to a pace more in line with income growth and interest rates.
Many potential purchasers, particularly millennials, have been priced out of the market as home prices have grown at an exponential rate. Purchase mortgage origination volumes are expected to grow to $2.1 trillion in 2023, $27 billion higher than the previous forecast. The refinance originations are expected to be around $1.1 trillion in 2023, as the impact of stronger home prices and higher interest rates are projected to offset each other.
This has been beneficial to house flippers, but that may alter the 2023 housing market. Mark Zandi, the chief economist of Moody's Analytics, said he is concerned about a harsh landing in the housing market, but he believes the market and economy will not collapse as they did last time. He believes that for the 2023 housing market, home prices will level off, decreasing in certain sections of the country while rising somewhat in others. In comparison to the rise in 2022, this prediction for 2023 appears fairly reasonable.
According to Zillow, the current typical value of homes in the United States is $344,141. This value is seasonally adjusted and only includes the middle price tier of homes. In April 2021, the typical value of homes was $284,000. Home values have gone up 20.9% over the past year.
Zillow's housing market forecast has been revised from April. The real estate group now forecasts 11.6% home value growth over the next 12 months (May 2022-April 2023).
Through April 2023, they predict a gradual deceleration in annual home value growth from the current rate of 20,9 percent to 11.6 percent. This is a decrease from the March forecast of 14.9% growth for the coming year. In the next three months, Zillow expects home values to increase by 5.2 percent, a decrease from the previous month's forecast of 5.5 percent growth. Zillow’s forecast for existing home sales has been lowered as well, now predicting 5.73 million sales in 2022. That would mark a 6.4% decrease from 2021.
- Even with these downwardly revised projections, the housing market in 2023 would still be extremely robust.
- In the history of the Zillow Home Value Index, which dates back to 2000, annual growth has only exceeded the current year-ahead prediction of 11.6% during this recent run of record-setting growth and for several months in 2005.
- While 5.73 million existing home sales would be a decline from 2021's extraordinarily robust level, it would be the second-best annual total since 2006.
- The downward revision was driven by rising mortgage rates, rising inventories, and pending home sales and mortgage application data that were weaker than anticipated.
The robust long-term outlook is driven by the expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes. While Zillow's housing market forecast is bullish, it is also a bit of an outlier when compared to CoreLogic's forecast. The CoreLogic HPI Forecast shows that higher mortgage rates erode buyer affordability and should dampen demand in the coming months, leading to the moderation in price growth in their forecast.
Their national year-over-year appreciation will slow to 5% by February 2023, as rising interest rates are expected to sideline even more buyers. U.S. home price growth registered a year-over-year increase of 20% in February, another series high and marking 12 months of consecutive double-digit gains. The CoreLogic HPI Forecast indicates that home prices will increase on a year-over-year basis by 5% from February 2022 to February 2023.
On the other hand, Fannie Mae's housing market prediction is less bullish than Zillow's. According to their recent housing market forecast, home price growth will remain strong but decelerate. They predict the effects of worsening affordability to lead to a drag on home price growth.
They still expect strong appreciation for this year as inventories currently remain very tight and measures of buyer traffic remain robust. Fannie Mae's expectation of 7.6 percent growth in 2022 is still considerably higher than the average pace of 5.4 from 2012 to 2019. However, this represents a large deceleration from 2021’s expected record house price growth of 17.3 percent.
The FMHPI is an indicator for typical house price inflation in the United States. It shows that home prices increased by 11.3 percent in 2020 and 15.9 percent in 2021, as a result of robust housing demand and record low mortgage rates. According to Freddie Mac's recent housing forecast, house value growth in 2022 will be less than half of what we've witnessed last year.
Given the anticipated rise in mortgage rates, Freddie Mac anticipates some cooling in housing demand, forecasting house price growth to slow from 15.9 percent in 2021 to 6.2 percent in 2022 and then to 2.5 percent in 2023. Home sales were strong in 2021, with fourth-quarter home sales expected to come in at 7.1 million. They forecast home sales to hit 6.9 million in 2022 and increase to 7.0 million in 2023.
The increase in house price growth will be less transitory than the increase in consumer prices, as the U.S. housing market will continue to struggle with a shortage of available housing for many months to come. Strong house price growth is expected to lift home purchase mortgage originations from $1.9 trillion in 2021 to $2.1 trillion in 2022.
With a higher mortgage rate forecast for 2022 and 2023, they anticipate refinancing activity to soften, with refinancing originations declining from $2.7 trillion in 2021 to $1.2 trillion in 2022 and $930 billion in 2023. Overall, the company forecasts total originations to decline from the high of $4.7 trillion in 2021 to $3.3 trillion in 2022 to $3.1 trillion in 2023.
Housing Market Trends 2022 (Prices, Sales, Inventory)
The prices are not going to decline in 2022. The various forecasts from experts show that 2022 will remain a sellers' housing market, and home values are expected to increase by double-digit percentage points. If mortgage rates continue to rise, although, at a slower rate than in recent months, demand will likely decrease in the fall and winter, while home prices will continue to grow, albeit at a slower rate.
The real estate market has emerged as a boon for sellers and a source of worry for buyers in the middle of this epidemic. Home prices have been increasing in the mid-single digits for many years. Recent double-digit price rises reflect the convergence of exceptional demand and chronically low supply.
Prices are increasing as a result of enough money on the sidelines and very low mortgage rates. The improving economy and the approaching peak homebuying years of millennials are driving a residential housing boom. The housing supply is now at its lowest level since the 1970s, due to millennial homeownership and other factors such as rising building prices and real estate speculators snapping up starter homes.
In May 2022, 25 percent of total sales were made in cash, down from 26% in April and up from the 23% recorded in May 2021. This indicates that one-fourth of purchases were conducted with cash, indicating that there is a sizeable group of buyers who are not impacted by mortgage rate changes. Investors made up 16% of all transactions, down slightly from April and from a year ago. This also indicates that higher interest rates will have less of an influence on the housing market than one might expect. Detached single-family houses continue to be in great demand.
These properties provide greater living space and separation from adjacent houses than attached properties provide. New home sales rebound 10.7% in May and the median house price jumps 15.0% to $449,000 from a year ago. About 696,000 new single-family houses were sold in May on a seasonally adjusted annual basis.
The surprising uptick in sales of new single-family houses in the United States in May is likely to be short-lived as home prices continue to rise and the average contract rate for a 30-year fixed-rate mortgage hits 6 percent, decreasing affordability. Mortgage applications have plummeted this year due to fast-rising mortgage rates, which are already at their highest level since the Great Recession. Therefore, sales are predicted to fall further.
The Federal Reserve raised rates this year to reduce decades-high inflation, pushing up housing prices by hundreds of dollars each month and crushing demand. In a warning of possible weakness, the number of housing starts plummeted 14.4% to 1.5 million last month from 1.8 million in April, according to the Census Bureau. After four consecutive monthly reductions, the surge in sales likely reflected customers racing to lock in mortgage rates in expectation of more hikes.
A study conducted last month indicated that homebuilders anticipated fewer sales in June. While data released by the Department of Commerce indicated that the supply of new homes reached a 14-year high last month, the overall housing inventory remained considerably low. At May's sales pace it would take 7.7 months to clear the supply of houses on the market, down from 8.3 months in April.
With a near record-low inventory of previously owned homes, some economists believe higher borrowing costs will have a moderate impact on the new housing market. In the long run, an infusion of newly-built homes could benefit the housing market. But there won't likely be a surge in new inventories this year or even next year. Builders cannot develop new homes quickly enough to meet up with customer demand. Over a decade of underbuilding in the new home sector has increased pent-up demand, despite builders' best efforts to increase inventory.
According to the most recent housing market forecast (by realtor.com), home price rise may slow in the future, but it has remained hotter for longer than expected, leading to an upwardly revised prediction of 6.6 percent for 2022. Home sales are slowing, lowering their original 2022 growth forecast to 6.7 percent. While they now predict a significant drop from 2021, if house sales match their forecasts, 2022 sales will be the second highest since 2007, after only 2021.
The listing price, also known as the asking price, is the amount a seller has marketed a property for, whereas the sale price is the amount it ultimately sells for. In May 2022, the national median listing price for active listings was $447,000, up 17.6% compared to last year, according to Realtor.com.
The largest year-over-year median list price growth occurred in Miami (+45.9%), Nashville (+32.5%), and Orlando (+32.4%). Austin reported the highest growth in the share of homes that had their prices reduced compared to last year (+14.7 percentage points), followed by Las Vegas (+12.3 percentage points) and Phoenix (+11.6 percentage points).
According to the National Association of Realtors®, the median existing-home price for all housing types in May 2022 was $407,600, up 14.8% from May 2021 ($355,000), as prices increased in each region. This marks 123 consecutive months of year-over-year increases, the longest-running streak on record. Properties typically remained on the market for 16 days in May, down from 17 days in April and 17 days in May 2021. Eighty-eight percent of homes sold in May 2022 were on the market for less than a month.
Much of the growth was fueled by a 20.6 percent increase in property prices in the South. All other regions experienced home price growth of between 6% and 14%. Sales continue to be more robust on the higher end of the market, where the supply is stronger.
- The median existing single-family home price was $414,200 in May, up 14.6% from May 2021.
- The median existing condo price was $355,700, an annual increase of 14.8% over 2021.
- The median price in the Northeast was $409,700, up 6.7% from one year ago.
- The median price in the Midwest was $294,500, an 9.5% climb from May 2021.
- The median price in the South was $375,000, a 20.6% jump from one year prior.
- For the ninth consecutive month, the South experienced the highest pace of price appreciation compared to the other regions.
- The median price in the West was $633,800, up 13.3% from May 2021.
Housing prices have risen in the first quarter of 2022 despite rising mortgage rates, indicating a mismatch. Mortgage rates will eventually slow down home prices. Economists predicted rates to rise by the end of 2022, but the recent surge in rates has many analysts wondering what would happen next. It happened faster than many predicted, with rates on 30-year fixed loans breaking through 5 percent in April to the highest level in more than a decade.
As mortgage rates rise, competition among those who can afford to buy should continue fierce for the time being. Also, as rates have risen beyond 5%, the refinancing boom of 2020 and 2021 also appears to be finished. According to Black Knight data, rate-and-term refinance activity continued to fall in March, while cash-out refinances remained unchanged.
The economic recovery, particularly inflation, has been very evident in the late epidemic phases, and we now face a backdrop of mortgage rates rising at the quickest rate in decades. More than two-thirds of mortgage experts surveyed by Bankrate believe rates will continue to rise since inflation is not slowing down quickly.
The Fed is likely to raise interest rates several times this year, and its policy has a direct impact on the interest rates on various mortgage products, specifically adjustable-rate mortgages and home equity loans. Fed policy has fewer repercussions for fixed mortgage rates, which track 10-year Treasury yields more closely. Borrowers will see an end to the historically low rates that typified the period following the 2008 and 2009 global financial crises.
As of June 22, 2022, interest rates jumped for all types of loans compared to a week ago. The national average 30-year fixed-mortgage rate is 6.04 percent, up 7 basis points over the last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 5.28 percent. The average rate for a 15-year fixed mortgage is 5.30 percent, up 15 basis points from a week ago.
- At the current average rate, you’ll pay a combined $599.55 per month in principal and interest for every $100k you borrow.
- That’s an extra $7.69 compared with last week.
- Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $554 per $100k borrowed.
- Monthly payments on a 5/1 ARM at 4.20 percent would cost about $489 for each $100,000 borrowed over the initial five years
- But it could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
With inflation blazing and the U.S. economy chugging along, the average 30-year mortgage rate rose to 6.04 percent this week, up from 5.28 percent the previous week, according to Bankrate's nationwide poll of large lenders, a figure not seen since 2008. Although the Federal Reserve doesn’t influence rates on fixed mortgages, its recent move to raise the federal funds rate due to inflation — and the indication it’ll continue to raise that rate this year — does have some impact on mortgages. One of the primary challenges that investors and buyers will need to address this year is rising interest rates.
Today's rates are much higher than they have been in years, which is likely to have a few knock-on consequences in the US housing market – though they are unlikely to produce significant declines in housing prices. While quickly rising mortgage rates may dampen the strong housing demand somewhat, do not anticipate a halt to home price appreciation. A slower rate of appreciation is more likely. The impact of higher mortgage rates is not yet fully reflected in the recent sales data but it has given affordability a big hit.
Keep in mind that, despite recent increases, mortgage interest rates are still within reach when seen in historical context (back in 1981, rates topped 18 percent for a 30-year fixed-rate mortgage). If the house you're eyeing is a good fit for your family and won't put you in financial peril, go ahead and buy it. The longer you delay, the more money you'll have to spend on rising rentals and saving for the down payment you'll need to buy a house. It all depends on your financial status and the housing market in the area where you live.
Rising mortgage rates still have the potential to drive a sizable portion of buyers away from the housing market. This year has already seen a significant increase in housing prices. When combined with interest rate increases, it may become too much for many homebuyers. As a result, the first half of the year is likely to see continued high house prices. When inventory increases and mortgage rates rise, the housing market may soften in the second half of 2022 and in 2023.
Even with rising mortgage rates and higher prices, the housing market would remain a seller's market due to very low supply and increasing demand as more millennials are projected to buy houses in 2022. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country.
This is encouraging news for the millions of millennials who are approaching peak homebuying age. Millennials are the largest generation in history, and they are already in their mid-thirties, approaching their prime home-buying years. They were delayed in purchasing a home, but are now back in full force. Thus, we have two, four, or five years of millennial homeownership.
According to the National Association of Realtors, sales of existing homes in May dropped 3.4% to a seasonally adjusted annualized rate of 5.41 million units. Sales were 8.6% lower than in May 2021. April’s sales were revised slightly lower as well. This is the lowest sales figure since June 2020, when the Covid epidemic was in its early stages. Adjusting for that, it is the lowest since January 2020.
This number is based on monthly closings, so it likely represents contracts signed in March and April. During that time, the average 30-year fixed mortgage rate jumped from roughly 4 percent to 5.5 percent. According to Mortgage News Daily, it is now about 6%. Rising interest rates, along with fast house price increases and persistent limited supply, have delivered a big blow to affordability. NAR does predict a further decline in home sales this year.
At the end of May, there were 1.16 million properties for sale, an increase of 12.6% from the previous month but a decrease of 4.1% from May 2021. At the current sales rate, this implies a supply of 2.6 months. The lowest end of the market has the smallest supply, which is presumably why activity there remains slower than at the higher end.
A year earlier, sales of properties priced between $100,000 and $250,000 plummeted by 27%. The sale of properties valued between $750,000 and $1,000,000 increased by 26%. Sales of properties valued at over $1 million increased by 22% annually. Distressed sales – foreclosures and short sales – represented less than 1% of sales in May, essentially unchanged from April 2022 and May 2021.
Single-family home sales declined to a seasonally adjusted annual rate of 4.80 million in May, down 3.6% from 4.98 million in April and down 7.7% from one year ago. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 610,000 units in May, down 1.6% from April and down 15.3% from one year ago.
The South accounted for close to half of all the sales in May, accounting for 44 percent, followed by the Midwest at 23 percent and the West at 20 percent, with the Northeast accounting for only 13 percent. The highest sales were seen in the price segment of $250,000 to $500,000. This price range accounted for 42% of total home sales seen in May. The price segment in the $100,000 to $250,000 range accounted for 20% of total home sales.