5 Things That May Slow the Housing Market in 2022

If you’re in the market for a new home in 2022, you may be wondering if the housing market boom will continue throughout this year. While 2021 saw home prices increase double-digits in some parts of the country, experts say that home sales may slow in 2022 for various reasons. Here are five things that will impact the housing market in 2022:

Interest rates are rising- The Fed raised interest rates a quarter of a point in March 2022, and there may be more rate adjustments in 2022, as suggested by Federal Reserve Chair Jerome Powell. As The Fed monitors inflation, they may announce quantitative tightening at the May 4th, 2022 Federal Reserve meeting.

Rising interest rates generally slow the housing market as buyers’ budgets become stressed due to higher monthly payments. In some instances, rising interest rates may remove some buyers from the market as they determine they no longer qualify for a loan or can afford the monthly payment.

Inventory- 2021 was a year of record-low home inventory levels, helping to push home prices to new highs. Compared to March 2021, there are more homes on the market today than one year ago.

Although it’s early in the year, home inventory may stabilize this year.

Work from home and relocation- Work from home policies are becoming permanent at many companies, and 2021 saw many people change residences to live in smaller towns and rural areas. The Great Relocation helped make home sales stronger outside of the city. Experts predict that those who were able to relocate may have already done so, which may impact home sales in urban and rural areas this year.

The home buying season has just begun- Both housing inventory and qualified buyers will increase as spring is typically the start. 2021 saw bidding wars and offers above the asking price, but with high inflation and rising interest rates, this may not be the case in 2022.

Foreclosures are on the rise- February 2022’s foreclosures increased 70% from 2021 and are an early indication that homeowners that benefitted from The CARES Act’s protection are financially struggling to make their payments current. The CARES Act, which allowed homeowners that put their mortgage payments on hold in 2020 and 2021, expired at the end of last year. As 2022 progresses, more homes may go into foreclosure, but the demand of homes will not drive prices on foreclosures as low as they were during The Great Recession.

While these factors may impact the housing market in 2022, regional differences play a role in prices and inventory. For a month-by-month look at the housing market in your area, follow the National Association of Realtors research and statistical data.

Important Disclosures

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

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