What Do Rising Mortgage Rates Mean for the Housing Market in 2022?

What Do Rising Mortgage Rates Mean for the Housing Market in 2022?

Remember in the summer when government officials said that spiking prices were only temporary as the economy got back on track after the pandemic surge along with supply and demand issues?

They’re singing a different tune these days, and the real estate industry is paying attention. Federal Reserve Chairman Jerome Powell has finally acknowledged that the stubborn inflation means that the Fed may raise interest rates along with reducing its purchases of mortgage-backed securities.

That in itself is enough to get the real estate industry to sit up and take notice. Especially considering that in the early stages of the pandemic, the Fed pushed mortgage rates to their lowest rates on record, which in turn created a highly competitive housing market.

Rising mortgage rates, in turn, tend to have the opposite effect, locking some buyers out of the market. So what does it mean if interest rates on mortgages rise in 2022?

What Will The Real Estate Market Look Like in 2022?

Experts’ opinions are mixed. No one knows what will happen if interest rates rise in what is now a very hot and competitive market. Some big names in the real estate market think that there will be an initial shock, but others think that the housing market is strong enough to weather the storm.

For example, the Mortgage Bankers Association (MBA) forecasts that the average 30 year fixed mortgage rate which is currently at 3.1%, may hit as high as 4% by the end of 2022. That rate increase will push the median price of homes down 2.5% the following year – a stark contrast to the nearly 20% increase in home prices over the last year.

But not everyone agrees with this assessment. Fannie Mae predicts only a modest increase, ending the year at 3.3%. Fannie Mae seems to think that home prices will jump up by another nearly 8% in 2022, which is the biggest increase in the real estate market since 1980.

Why Are Home Prices Growing Despite Higher Mortgage Rates?

This has created an interesting situation with the housing market. How is it that home prices can still grow at a reliable and steady rate even if mortgage rates did go up as much as 4% or even more?

The answer lies in the difference between supply and demand in the housing market. It’s worth noting that we’re right in the middle of the five year window when Millennials born during that generation’s five largest birth years (which would be between 1989 and 1993) will hit the home buying age of 30.

These buyers are entering into a market where the actual homes for sale are at some of the lowest levels in 40 years. Freddie Mac even estimates that as a whole, the US is about 4 MILLION homes short of demand. That’s a lot of active, hungry buyers without a whole lot to offer them!

What Will The Future Hold for Prospective Home Buyers?

It can be hard to pinpoint exactly what the future will hold for prospective home buyers, but at the moment, 2022 and beyond are still looking to be a seller’s market. However, there are still some gold nuggets to be found if you know where to look.

A reliable, reputable California mortgage company can be a great place to start. Not only are they staffed with local experts who can help you find the best home for your needs, but they can also help you get a good rate despite rising mortgage prices. The best home loan companies will work with you and take your unique situation into account, providing you with funding options even if banks or other lenders say no.

If you’re interested in learning more about the local housing market or you’re looking for a lender that will work hard to secure you the best possible deal, reach out to the experts at LBC Mortgage. Our experienced California mortgage broker can help you get a great deal on a home loan even if you’re self-employed or have another unusual income situation.

The fact is that mortgage rates will always be rising and falling, and there is no “right time” to buy that works for everyone. Contact the professionals at LBC Mortgage today and let us help you navigate the uncertainty of the real estate market so that you can buy or sell your home with ease!


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