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Housing Market Predictions In 2022: Will Prices Drop?

Housing Market Predictions for October 2022 What is Forbs Predicting?

“Buyers, sellers and real estate professionals around the country are trying to adapt to a housing market that’s vastly different from just a few months ago. In Orange County, California, Rita Tayenaka, who owns Coast to Canyon brokerage, says buyers and sellers couldn’t be farther apart—and it’s not clear how the standoff will end.

Tayenaka and her agents counsel sellers to look at recently sold properties and list theirs for a bit less, but sellers want to go even higher. “The popular thought is ‘try it for a few weeks.’ I warn about this potentially leaving the home on the market for a more extended period,” says Tayenaka.

What’s more, buyers are starting to balk at the condition of the homes they’re finding in their price range. Sellers have had the upper hand for the past two years, and buyers have had to accept anything thrown their way. Now, Tayenaka says, buyers feel the repairs they want are “warranted because of the market.”

This disconnect is just one factor keeping a lid on sales activity. Higher mortgage rates are another.

“A household earning the median annual income of $71,000 and using a 20% down payment could afford a home priced at $448,700 in January 2022 when rates were 3.1%,” says’s manager of economic research, George Ratiu. “In contrast, at a 7% mortgage rate, the same household can only buy a $341,700 home.”

Mortgage experts are split on whether rates will stay the same or even decline from here—as the MBA economics team expects—or soar higher, as’s Ratiu says is more likely.

See: Mortgage Rates Forecast for 2022

Housing Market in Transition

Realtors across the country confirm what the macroeconomic data says: the housing market is in a transition, driven by an uncertain economy and consumer backdrop. Inflation is hot and economic growth, as measured by the GDP reading, is tepid. But jobs remain plentiful and few people are being laid off. The stock market has been battered, yet consumer sentiment remains high.

Housing-market experts are increasingly likely to see a recession in the future: economists at Fannie Mae call a 2023 downturn “likely” while the MBA team calls the odds of a recession roughly even.

See: Recession Tracker: Are We In A Recession?

Will Home Prices Continue to Rise?

Inflation, high mortgage rates and record-high home prices are making it harder and harder to afford a home, and that’s not likely to change soon. Economists at Fannie Mae expect prices to be, on average, 16% higher in the coming quarter than they were a year ago.

MBA economists also expect home price gains for the foreseeable future. They forecast a 9.8% yearly increase for prices in 2022 compared to 2021 and a 2.8% gain in 2023.

Housing Inventory Predictions for 2022

One of the biggest drivers of prices is inventory. If there aren’t nearly enough homes for every buyer who wants one, like over the past few years, the housing market looks a bit like “The Hunger Games,” in the words of real estate agent Anna Fiascone, a Realtor in the Chicago suburbs.

Now, just as many buyers are starting to step back and some sellers may be, as well. Inventory was 26.6% higher than a year ago in August, according to a report, but that’s because homes were lingering on the market longer. There were actually 13.4% fewer new listings than a year ago during the same month.

“Less new inventory coming onto the market tells us homeowners are hesitant to list, and high mortgage rates are likely a major factor,” said Orphe Divounguy, senior economist at Zillow, in an email.

Should I Buy a Home Now or Wait?

Buying a house—in any market—is a highly personal decision. Because homes typically represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.

Use a mortgage calculator to find out how much your monthly housing costs will be based on your down payment, interest rate, and likely home price.

Trying to time the market or predict what will happen in the future is a waste of time. Buy based on your budget and needs. If you find a home you love in an area you love and it also fits your budget, then chances are it might be right for you. But if you make too many sacrifices just to get a house, you may end up with buyer’s remorse and an expensive albatross you have to offload.

Tips for Buying in a Hot Housing Market

Start with a budget and make a pact with yourself to stick with it. Even with a slight uptick in the number of homes for sale, buyers are still facing steep prices and the highest mortgage rates in 15 years.

“It’s still a seller’s market, but it’s a little more attainable,” says Sue Van Woerkom, a real estate agent in the northern suburbs of Columbus, Ohio. “It’s a good time for a buyer to get in and have a little more time to make a decision.”

Homebuyers should equip themselves with an experienced Realtor who knows the area, Van Woerkom says, and a good lender with whom they’re comfortable communicating regularly.

Tips for Selling in a Hot Housing Market

The first step for a successful sale is to find a listing agent who knows the area and comes highly recommended. A good agent will work closely with you to price your home competitively while fielding questions and offers from prospective buyers.

Tayenaka, the Orange County Realtor, notes the outsize number of homes falling out of escrow recently as a cautionary tale to sellers who continue to demand 2021 prices. “Everyone thinks their house is special,” she says.

Even though the market may still be tipped in your favor, it’s in your best interest to present your home in the best possible light. Not everyone has cash dedicated to renovations and repairs, but a little sweat equity can go a long way. The first step is to declutter, organize and clean.

As Sue Van Woerkom notes, more properties are falling out of contract, usually because home inspections raise red flags. There may also be some buyer fatigue to blame, she says—a cautionary tale for sellers. “People are tired of taking terrible properties.”

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