So far, 2022 has been a year of ups and downs for the real estate market. Historically low-interest rates on mortgages led to borrowers being able to afford much larger loans than ever before, which was a good thing as median home prices were going through the roof due to a combination of low availability and high demand.
This kept the market humming along for months, at least until worries about inflation and an incoming recession prompted the Federal Reserve to begin hiking interest rates for lenders in the US. Real estate experts across the board began predicting that the sky was going to fall as a result of these new changes. But what’s really in store for us for the rest of the year? Here are what the real estate market trends for 2022 might actually look like.
The Fed’s decision to raise interest rates makes plenty of financial sense through the lens of slowing down inflation. The downside, of course, is that raising those rates means lending is less available to prospective home buyers, as a mortgage is now inherently more expensive than it was prior to the rate hikes. This, in turn, has the potential to have a cooling effect on the market; with buyers qualifying for less capital, house prices would have to come down to that level or risk not selling.
This has yet to come to pass, though. 2022 home sales have been rising unabated, with a new record high of $413,800 in July, a full 11 percent increase from July of last year. Meanwhile, the median list price for homes in August went up 14.3 percent, a full month after interest rates began climbing upward. This grew more slowly than in previous months, but it is still going up.
So far, the new interest rates have yet to make a major impact on the real estate market. Home prices are still rising, even with mortgages getting more expensive. Truth be told, the number of home sales has been diminishing, slowly but surely, over the year as a result of prices climbing; July, for example, saw a decline of 5.9 percent from the previous month and a 20.2 percent drop from 2021.
Yet with sale prices continuing to rocket upward, this seems to be counteracting the drop in volume. It’s likely that median home prices are going to continue to increase over the rest of 2022, losing steam over the next few months but still much higher than they were at the beginning of the year. When it’s all said and done, the National Association of Realtors predicts an overall 11 percent rise in property prices by the end of the year, even in light of falling sales and rising interest rates. In other words, things are cooling off, but very slowly, providing plenty of opportunities for sellers despite the coming slowdown.