Current Housing Market Trends in 2022
Mortgage rates are rising. Home sales are declining. Supply is improving. Here are the latest housing market trends as seen in June 2022. To begin with, 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 on a year-over-year basis.
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. Home 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 August 2022, 24 percent of total sales were made in cash, the same share as in July, but up from 22% in August 2021. This indicates that around 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 (who make up many cash sales) made up 16% of all transactions in August, up from 14% in July and 15% in August 2021. This also shows that higher interest rates have less of an influence on investors' purchases as compared to first-time buyers.
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. Last month there was a surprising uptick in sales of new single-family houses and many experts believed that is likely to be short-lived as home prices continue to rise and the average contract rate for a 30-year fixed-rate mortgage tops 6 percent, decreasing affordability.
The Commerce Department announced that new home sales decreased 12.6% to a seasonally adjusted annual rate of 511,000 units in July, the weakest pace in over six years. Six of the last seven months have seen a drop in new-home sales. The decline increased the inventory of new homes to the highest level since March 2008.
New home sales have been trending lower as prospective buyers see their budgets stretched thin by long construction times, mounting costs, and rising mortgage rates. The average interest rate for a 30-year, fixed-rate mortgage was above 5% for all of July, having risen more than two percentage points since January. The increase in new-home inventories is assisting in slowing the price rise. The median price for a new construction home rose to $439,400, up from $402,400 the previous month.
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 is raising rates this year to reduce decades-high inflation. It is increasing the cost of buying a home and crushing demand.
Residential construction was mixed in August 2022, as housing starts rose 12.2% while permits fell 10%, the Census Bureau reported recently. Housing starts were at an annual rate of 1.575 million while permits for future homes came in at an annual rate of 1.52 million. Single-family starts increased slightly, as home builders continue to moderate their production levels as the cost of construction materials remains at elevated levels and buyers react to rising mortgage rates.
Regionally, the biggest drop in permits came in the South, where markets have been among the hottest. Multi-unit starts also fell more than those for single-family homes. A slowdown in new construction is concerning because the housing market is still underbuilt in comparison to demand. With millennials continuing to enter their prime home-buying years and a lack of existing-home inventory, new home construction is critical in meeting shelter demand.
Privately owned housing completions were at a seasonally adjusted annual rate of 1,342,000 in August. This is 5.4 percent (12.1%) lower than the revised July estimate of 1,419,000, but 3.1 percent (10.5 percent) higher than the August 2021 rate of 1,302,000. Single-family housing completions in August totaled 1,017,000, up 0.4 percent (12.8%) from the revised July rate of 1,013,000. The August rate for units in buildings of five or more units was 318,000.
Housing Sales Fell in August 2022
Existing home sales declined in August, and prices also softened substantially. According to the National Association of Realtors, sales of previously owned homes decreased 0.4% in August from July to a seasonally adjusted annualized rate of 4.80 million units. This is the slowest sales rate since May 2020, when activity briefly halted due to the outbreak of Covid. Aside from that, the pace is the slowest since November 2015. Sales decreased by 19.9% compared to August 2021.
“The housing market is showing an immediate impact from the changes in monetary policy,” said Lawrence Yun, chief economist for the Realtors, noting that he will revise his annual sales forecast down further due to higher mortgage rates. “Some markets may be seeing price declines.”
The sales figures represent closings, indicating that contracts were likely signed in June and July when mortgage rates spiked and then declined. According to Mortgage News Daily, the average rate on the popular 30-year fixed mortgage began June at around 5.5% and then jumped to over 6% by the middle of the month. It then retreated slightly, remaining in the 5.7% range for the majority of July before falling to the low 5% range by the end of the month.
Home sales fell in all price ranges, but especially at the lower end. Year over year, sales of homes priced between $250,000 and $500,000 were down 14%, while sales of homes priced between $750,000 and $1 million were down only 3%. Much of this is due to a lack of supply, which is most acute at the low end of the market. Distressed sales – foreclosures and short sales – represented approximately 1% of sales in August, essentially unchanged from July 2022 and August 2021.
Single-family home sales decreased to a seasonally adjusted annual rate of 4.28 million in August, down 0.9% from 4.32 million in July and down 19.2% from the previous year. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 520,000 units in August, up 4.0% from July and down 24.6% from one year ago.
The South accounted for close to half of all the sales in August, accounting for 45 percent, followed by the Midwest at 24 percent and the West at 18 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 43% of total home sales seen in August. The price segment in the $100,000 to $250,000 range accounted for 22% of total home sales. The price segment in the $500,000 to $750,000 range accounted for 18% of total home sales.
US House Prices Continue to Trend Upward – August 2022
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. Although price growth slows, homes are still more expensive than a year ago. The latest data for August 2022 from Realtor.com shows that the national median home price for active listings decreased to $435,000 from a record high of $450,000 in June. This represents a deceleration from last month's growth rate of 16.6% to an annual growth rate of 14.3%.
In addition, the 3.1% decline in the median listing price from July to August is the largest July-to-August decline in our records (dating back to 2016). In addition, the median list price of pending listings–homes for which the seller has accepted a buyer's offer–decelerated from 12.4% in July to 11.9% in August. This is the fourth consecutive month of pending listing price slowdown, and its lower growth rate relative to the overall median listing price shows buyers are picking less expensive properties.
And, for the week ending September 3, the median listing price rose by 13.4% over that same week last year. All the critical variables show that the tables are turning in favor of homebuyers more than sellers. The typical asking price of for-sale homes was up from last year by double-digits for the 38th week, with the pace of growth slightly ahead of last week.
Housing Market Trends for August 2022 (50 Largest Metro Combined Average)
In August 2022, active listing prices in the nation’s largest metros grew by an average of 10.9% compared to last year, decelerating from 12.0% last month. Southern metros led the charge in active listing price growth, growing by 13.5% on average over the past year. The southern metros of Miami (+33.4%), and Memphis (+25.8%), posted the highest year-over-year median list price growth in August, followed by Milwaukee (+25.0%).
Western metros had the highest growth rate in April at 16.6% but are now tied for third with the Northeast at 7.9%. Western metros witnessed the most price reductions (+16.2%), followed by southern metros (+10.4%). August was the first time no western metros made our list of hottest markets. Phoenix (+30.9%), Austin (+24.8%), and Las Vegas (+24.4%) had the most price reductions compared to the previous year.
|Region||Active Listing Count YoY||New Listing Count YoY||Median Listing Price YoY||Median Listing Price Per SF YoY||Median Days on Market Y-Y (Days)||Price Reduced Share Y-Y (Percentage Points)|
|Midwest||6.5%||-18.1%||11.3%||8.6%||+ 4 days||+4.2 pp|
|Northeast||-2.4%||-19.7%||7.9%||4.4%||+3 days||+2.7 pp|
|South||56.3%||-3.8%||13.5%||12.0%||+4 days||+10.4 pp|
|West||70.8%||-14.3%||7.9%||7.7%||+7 days||+16.2 pp|
Housing Price Trends for August 2022 [Sales Price]
According to the National Association of Realtors®, house prices were still greater than they were a year earlier, even though increasing borrowing rates made housing less affordable. In August, the median price of an existing home that was sold was $389,500, which is 7.7% higher than it was a year ago. This marks 126 consecutive months of year-over-year increases, the longest-running streak on record.
However, it was the second month in a row that the median sales price retracted after reaching a record high of $413,800 in June, the usual seasonal trend of prices declining after peaking in the early summer. Due to seasonality, home prices tend to dip from July to August, but the reduction this year was more dramatic than typical, which suggests a considerable slowdown in the housing market.
Home prices typically fall by 2% from June to August, but they have fallen by 6% this year. However, home prices are still being supported by limited supply. At the end of August, there were 1.28 million homes for sale, the same as a year ago. At the current rate of sales, that equates to a 3.2-month supply. After five successive monthly increases, the inventory of unsold existing homes dwindled to 1.28 million by the end of August.
Much of the growth was fueled by a 12.4 percent increase in property prices in the South. All other regions experienced home price growth of between 1.5% and 7.1%. 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 $396,300 in August, up 7.6% from August 2021.
- The median existing condo price was $333,700 in August, an annual increase of 7.8%.
- The median price in the Northeast was $413,200, an increase of 1.5% from the previous year.
- The median price in the Midwest was $287,900, up 6.6% from the previous year.
- The median price in the South was $356,000, an increase of 12.4% from August 2021.
- For the twelfth consecutive month, the South experienced the highest pace of price appreciation compared to the other regions.
- The median price in the West was $602,900, a 7.1% increase from August 2021.
Higher Mortgage Rates Causing a Drop in Housing Prices?
Mortgage rates fell sharply early in the pandemic, reaching historic lows of less than 3% at the start of 2021. The days of sub-3 percent 30-year fixed mortgage interest rates are over. The mortgage rates are rising at the fastest pace in decades. Housing prices are still higher than the previous year despite rising mortgage rates. Mortgage rates are slowing 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. 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.
Experts disagree on the direction of mortgage rates in the coming week. 64% of respondents to Bankrate's weekly poll believe that interest rates will increase, while 18% believe that they will decrease and another 18% believe that they will remain the same.
As of September 14, 2022, interest rates jumped for almost all types of loans compared to a week ago. The national average 30-year fixed-mortgage rate is 6.24 percent, up 13 basis points over the last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 5.54 percent. The average rate for a 15-year fixed mortgage is 5.53 percent, up 21 basis points since the same time last week.
- At the current average rate, you’ll pay a combined $607.29 per month in principal and interest for every $100k you borrow.
- That’s a decline of $7.74 compared with last week.
- Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $569 per $100k borrowed.
- Monthly payments on a 5/1 ARM at 4.58 percent would cost about $510 for each $100,000 borrowed over the initial five years
- But with adjustable-rate mortgages, it could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
How Mortgage Rates Have Moved:
- 30-year fixed mortgage rate: 6.24%, up from 6.11% last week, +0.13
- 15-year fixed mortgage rate: 5.53%, up from 5.32% last week, +0.21
- 5/1 ARM mortgage rate: 4.58%, up from 4.52% last week, +0.06
- Jumbo mortgage rate: 6.24%, up from 6.10% last week, +0.14
With inflation blazing and the U.S. economy chugging along, the average 30-year mortgage rate rose to 6.24 percent this week, up from 6.11 percent the previous week, according to Bankrate's nationwide poll of large lenders. 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 as well).
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.