What will the 2022 housing market look like? It could ‘come back down to sanity’

The Federal Reserve is expected to raise interest rates a few times in 2022, which means mortgage rates will likely rise. Both Redfin and Realtor.com predict a 30-year-fixed mortgage rate will reach 3.60% by the end of 2022, compared to an average of 3.30% now.

That’s not necessarily bad news for buyers, Olsen says. The “silver lining” of higher mortgage rates, she says, is that fewer speculative buyers will be in the market, because there is less money to be made. That could help the average person.

“When you have higher interest rates, it becomes more of the people who buy homes just to live in them,” says Olsen. “That’s something the market will benefit from, coming back down to sanity.” 

Millennials, who are at peak first-time home-buying age, will remain at a disadvantage compared to older generations when it comes to buying a house, says Olsen.

This is not only because homes are so much more expensive now than they were when baby boomers and older generations were buying their first homes, but because Boomers are staying in their homes longer as they live longer.

That means more and more first-time homebuyers are likely to need financial help from family and friends to make a down payment, says Olsen. Obviously, that will limit who can buy a house.

Housing affordability in the U.S. has been an issue for buyers, particularly young ones, for some time. But the issue has only been exacerbated since the onset of the pandemic, and will continue. 
Alicia Adamczyk
@ALICIAADAMCZYK