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Housing Market Predictions In 2022: Will Prices Drop? Robin Rothstein Forbes Advisor Staff, Reviewed By Rachel Witkowski, Editor, Updated: Oct 31, 2022

Mortgage rates had one of the largest single da drops since 2009 on Thursday of this week. This, along with other consumer price data may provide signals that Fed policies are working to curtail inflation. If so, anticipated increases in mortgage rates may not have to be exercised, allowing buyers some relief. Please click on the Forbes Advisor link to learn more.

Home prices are beginning to show signs of cooling as buyers have pulled back due to mortgage rates doubling this year, which is starting to convince sellers to lower their sales price. However, the overall housing supply remains limited as those who purchased homes in recent years at low mortgage rates are staying put. Additionally, many sellers are waiting for interest rates to drop to have a better chance of getting the price they want. While home prices continue to climb from last year, the price points are not as high as earlier this year, indicating the over-heated housing market is slowing down.

Recent Home Prices and Market Changes – The median existing-home sales price in September was $384,800, up 8.4% from a year ago but down from the record high of $413,800 in June, according to the National Association of Realtors (NAR). Still, the higher housing costs have taken a toll on home shoppers as mortgage applications are at their lowest level in 22 years, according to the Mortgage Bankers Association (MBA). The current change in the housing market is partly due to the economy at large and consumer sentiment. Right now, the economy remains on shifting sands. On one hand, there are signs of a weakening economy as inflation reached a 40-year high of 8.2% in September. The Federal Reserve is expected to raise its rate for the sixth time this year during a November 1-2 meeting in response to higher inflation. Fitch Ratings forecasts that the U.S. will enter a recession period beginning in Q2 2023. But on the other hand, the job market and consumer spending remain strong. The mixed economic signals have caused the housing market to be in a stagnant period.

Housing Market Predictions for September 2022 – Many housing insiders warn buyers against trying to time the market as the economy wades through this period of uncertainty. “Deciding to buy now or wait is going to depend on the individual buyer’s motivation and situation. Waiting may not be a viable option,” says Krista Forsberg, a real estate agent at Keller Williams Realty in Edina, Minnesota. “Even if a buyer can push pause on buying to later in the year or 2023, there isn’t likely to be significant improvement in prices or interest rates.” As we approach the end of 2022, housing experts maintain a watchful eye on the economy, which is still being pulled in all directions by stubbornly high inflation, rising interest rates, the war in Ukraine and Covid-19, to name a few.

While housing has been the star of the U.S. economy the last few years, there are signs of wear. For instance, the 30-year fixed mortgage rate hitting a 20-year high at 7.08% by late October, making it harder for buyers to access affordable housing. The amount of existing-home sales dropped 1.5% from August to September, marking the seventh consecutive month of declining sales, according to NAR. “Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales,” said Lawrence Yun, NAR’s chief economist, in the report. However, Yun added that housing inventory remains near historical lows, which has held up demand when compared to other downturns and therefore, prices. “Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory,” Yun said. “The current lack of supply underscores the vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today.”