What Experts are Saying About the 2022 Housing Market

The 2022 Housing Market

  • Bidding wars with 30+ offers
  • $400k+ over the asking price
  • All cash offers

These are just a few of the common themes we’ve heard and seen since 2020.

Especially in California (where I live).

But with rising interest rates and inflation, a lot of people are asking,

“Is the real estate market cooling off?”

Redfin, Mike Simonsen, and Bill McBride are my go-to resource for all things housing data.

So let’s dig into some of their data to see what’s going on.

Monthly Mortgage Payments Went Up Due to Increasing Rates

The recent increase in interest rates has already had an impact on households this year.

At the beginning of 2022, a 30-year mortgage was hanging around 3%, and in June we saw rates as high as 6.3%.

This has a major effect on your monthly mortgage payment if you haven’t locked in a fixed rate 👇


housing 2022

New Home Sales Are Falling

Rising rates had an effect on new home sales in June 2022.

According to Redfin, roughly 60,000 home-purchase agreements fell through in June, equal to 14.9% of homes that went under contract that month.

Redfin housing 2022
Redfin: https://www.redfin.com/news/home-purchases-fall-through-2022/

Redfin Deputy Chief Economist Taylor Marr says,

“Rising mortgage rates are also forcing some buyers to cancel home purchases. If rates were at 5% when you made an offer, but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home or you may no longer qualify for a loan.”

More Houses Are Sitting On The Market

Another interesting piece of data to look at from Mike Simonsen is housing inventory.

Housing inventory has been historically low recently, but it looks to be on the upward trend.

When inventory is low, it makes it difficult to meet housing demand for buyers. This is partially the reason why the market was so hot the past few years.

Inventory gained 3.25% at the start of this month and looks like it is beginning to normalize. That’s 31% more inventory than last year at this time.


housing inventory 2022
Source: Altos Research

The steep upslope in the chart above is increasing each week and we don’t yet know if this curve will flatten.

Another chart from the Washington Post shows that housing inventory is spiking in some parts of the United States.


Source: Washington post https://www.washingtonpost.com/business/2022/07/09/housing-market-slowdown-mortgage-rates/

As policymakers work to get decades-high inflation under control, this could have an effect on housing prices.

Rock-bottom interest rates in 2020 and 2021 helped fuel the surge in housing prices since the start of the pandemic, which many housing experts are admitting may start to slow.

Naturally, with an economic slowdown, some people are asking if the housing market is headed towards another bubble.

But experts and economists believe this is not the case.

Why This Market Isn’t like 2008

Following the housing bubble in 2008, house prices declined nationally by about 26%.

It continued to drop for years due to distressed sales, foreclosures, etc.

But there is one big difference between today’s Pandemic Housing Boom and 2008.

We are not seeing the same kind of speculation and risky debt behavior that was so rampant during that period.

Shady lending practices, including little to no down payments, adjustable rate mortgages, and mortgages without documentation, are not relevant in the housing market we are seeing today.

Mortgage standards are nothing like they were the last time. Purchasers that acquired a mortgage over the last decade are much more qualified.

Source: Federal Reserve

In the past few years, artificially suppressed interest rates undoubtedly pulled forward home price appreciation.

But just because prices have rapidly escalated since 2020, does not mean it is a bubble.

The fundamentals of high wages, record low inventory, and low-interest rates, all contributed to the craziness of the past two years.

We will just have to watch and wait. However, we can be fairly confident that we won’t see crashing price declines like in 2008.

This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/solutions/#disclosures

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