Happy 1st day of December, it’s time for the 2022 real estate forecast. Here’s a summary of what some of the big real estate firms are predicting for home value growth and mortgage rates between now and the end of 2022. Spoiler alert no crash.
Home Value Growth Forecast (for reference in 2021 it was +20% increase):
-Zillow +14%
-Goldman Sachs +16%
-Fannie Mae +8%
-Redfin +3%
-Corelogic +2%
-Mortgage Bankers Association -2.5%
Mortgage Interest Rates Forecast (for reference in 2021 rates ranged from 2.75-3.45%):
-Fannie Mae 3.4%
-Redfin 3.6%
-Mortgage Bankers Association 4%
Key takeaways:
1. Everyone agrees interest rates are going to go up. Inflation is rising rapidly and one way to attempt to control it in real estate is to raise interest rates. Increased interest rates will reduce home buyers buying power. Less buying power for buyers means fewer bidding wars as buyers now have less budget to throw excess money at homes. In turn, this should result in homes selling closer to actual market value.
2. Projected home value appreciation will decrease compared to 2021. However, don’t confuse this to mean home prices are coming down. Homes are still predicted to continue to increase in value even if it’s at a reduced %. There is still a huge supply and demand issue, more buyers out there looking for a home than what’s available. The largest population of millennials is turning 30 and now looking to become homeowners. Until the market shifts to a more neutral market where supply is able to keep up with demand, don’t expect any price reductions.
3. Should you buy now or continue to wait. Predictions are home prices will continue to rise. Inflation is rising rapidly. Interest rates will increase, however still historically very low. My recommendation is the same as last year, if you’re in a great financial spot to be able to buy, then buy. With interest rates increasing from here on out, the longer you wait the less buying power you’ll have. This means you’ll be priced out of homes that you could afford today at 3.15% vs. 3.5%. This may mean now you have to settle for a smaller home, less desirable location in your city, farther out from the city center, etc. Especially if you’re going to live in that home for the long term 10+yrs. In the worst-case scenario, in the next 3-5 years home prices correct slightly, but your historically low-interest rate is locked in, and your payments are still affordable. You’ve only lost value on paper, you can ride out the correction period and you’ll be able to benefit once homes start appreciating again.
If you’re in the greater Milwaukee area and need assistance buying or selling, don’t hesitate to reach out to me for help with your real estate needs.
source: https://fortune.com/2021/11/23/housing-market-no-crash-redfin-slower-rise-buyers-2022-mortgage-rates