News & Trends
May 10, 2022

2022 Spring Market Update

In our 2022 Housing Market Trends blog, we discussed the challenges market experts expected in housing trends this year. As we enter prime buying season, we’re bringing you another market update to ensure mortgage success.

Some Good News

If you’ve been biding your time for inventory to increase, now’s the time to put yourself out there! Experts have noted a rise in inventory during the first two months of 2022. The Commerce Department reported that Housing Starts, which measure the beginning of construction on homes, rose 6.8% from January to February—22.3% higher than in February of 2021. Starts for single-family homes also rose 5.7% for the month and 13.7% annually.

Realtor.com and The National Association of Realtors (NAR) recently reported that the number of newly listed homes has grown since the beginning of 2022. Zillow expects more than 6.4 million total existing homes are expected to sell by the end of this year.

Combatting Rising Inflation

Consumer inflation, as measured by the Consumer Price Index, hit 40-year highs in February and the Federal Reserve has been under pressure to address the soaring costs of goods. The Federal Reserve can help tame inflation by raising their benchmark Federal Funds Rate, which is the overnight borrowing rate for banks. When rates rise, people tend to borrow less money, which helps cool the demand for goods. Over time, lower demand typically leads to lower prices.

When COVID-19 hit the United States, the Federal Reserve acted fast to combat record unemployment and a falling stock market by keeping interest rates low and giving American citizens much needed stimulus relief. This was made possible by the Federal Reserve essentially buying government-backed debt to keep the country from total financial and economic collapse, as reported by CNN Business.  While these debt purchases were emergency measures, they were always expected to be rolled back once the economy had enough momentum to recover.

As the Reserve begins a delicate balance between slowing their spending, battling inflation, and combating global political uncertainty, interest rates are expected to increase. Most housing experts expect rates to rise between an upper 3% up to 4% by the end of 2022. Freddie Mac also reported the 30-year fixed mortgage rate had increased by more than a full point in the past six months, as reported by Forbes Advisor this past March.

Home Prices Will Rise

Along with the expectation of rising mortgage rates, experts predict that home prices will continue to increase as well. While this is partially due to the Federal Reserve and inflation, home prices are also influenced by supply and demand. Though there are more homes entering the market, buyer demand remains strong. Home prices will most likely increase as supply attempts to meet demand. Zillow expects that the average US home will be worth almost $400,000 by the end of February, 2023.

You Can Still Have Market Advantage

Being prepared for a seller’s market can give you a significant advantage this season. Having a pre-approval letter can also give you an edge over other potential offers.

The Federal Housing Finance Agency increased the conforming loan limit this year to $647,200 for one-unit properties. Using a licensed Real Estate Agent in combination with an experienced lender can provide important insight on local market trends and assist in your house hunt.

When you’re ready to find the home of your dreams this year, contact us today.

Sources: Forbes Advisor, CNN Business, Keeping Current Matters, Realtor.com, Insellerate

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