Will dwelling costs fall in 2022? (Podcast)

2022 Home prices: more of them?

If you have your eye on a home purchase (or sale) in the coming year, you are probably wondering where prices are going – especially given the hot market we've had lately.

As mortgage advisor Arjun Dhingra put it in a recent episode of The Mortgage Reports podcast, "It is clear that this market was far from normal."

According to Dhingra, we can probably assume that there will be more of these in 2022. But why – and when can a final price decline be expected? Let's take a look.

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Why 2022 will be another strong year for housing

Between the third quarter of 2020 and the third quarter of 2021, home prices rose by a whopping 18.5%, according to the housing finance authority. And what is the demand from buyers? That was just as strong.

Unfortunately, these home trends are unlikely to go away in 2022.

As Dhingra puts it succinctly, “We are unlikely to see any price drops or a large increase in inventory next year. The market is just too hot and too stable. "

According to Dhingra, this stability is based on a number of factors, including the trust of home builders.

“We are unlikely to see any price drops or a large spike in inventory next year. The market is just too hot and too stable. "

"That trust was reported one after the other month after month – the last quarter and the previous quarter," says Dhingra. "And that just means that builders are still confident that they want to build houses and see the opportunities there – despite the bottlenecks and the higher construction costs."

The country's monthly housing supply is also healthy and moving quickly.

Most importantly, Dhingra said, existing homeowners are in a very good position.

"Their interest rates are low, their equity is high, and their payments are very affordable," he says. "Her FICO scores are also as high as any housing cycle in the history of the US economy, so there aren't many people in a hurry to unload their homes."

What could reverse property prices?

The only thing that could lead to a slowdown in the property market and a drop in home prices would be a "shock to the economy," which Dhingra calls. This can be done in one of three ways:

1. An increase in mortgage rates

Mortgage rates have been mostly low for the past two years. If that changes, however, it could cause buyers to pull back and home prices to reverse course due to declining demand.

"Mortgage rates have remained very, very low and attractive," says Dhingra. “If we saw a trend in mortgage rates above 4% next year, you might see a retreat among people looking to take out mortgages. This would also result in the builders pulling back and possibly not being as confident and bringing as many new homes to market which would also result in a small delay in housing construction. "

2. Stricter standards for mortgage loans

According to Dhingra, there have been some of the toughest mortgage approval criteria in the past 10 years. Should these standards be tightened for any reason – making it even harder to get credit – it could also slow down the situation.

This is a distant possibility that would likely only occur if the economy took a sharp downturn. For example, at the start of the pandemic, many lenders tightened standards due to uncertainty about buyers' financial stability.

Fortunately, Dhingra doesn't expect that in 2022.

"I don't see an increase in mortgage criteria next year as a real possibility," says Dhingra. "But if it were, it would definitely be a sign that things are turning around."

3. Big changes in employment

Finally, the third possibility would be a big change in the labor market. Specifically, we should see a large reduction in jobs among the homeowner population – not just among tenants.

"The majority of layoffs and job losses in the wake of COVID disproportionately affected tenants," says Dhingra. "So that was one of the main reasons why a large flood of apartments didn't suddenly hit the market."

When homeowners experience rampant job losses, they could be forced to list their homes, which could lead to more inventory and a slowdown in today's soaring prices.

The Joker: Houses forbearance

There's a wild card in the current housing market: The fact that nearly 1 million homeowners currently have mortgage interest plans.

Once these deferral plans expire, homeowners will either have to resume payments (if they can) or sell their homes. Owners who have built up a supply of savings during their forbearance may also want to top up or move to a new property, which could also have an impact on the market.

"We have close to a million indulgent homeowners," says Dhingra. "What they do after the indulgence remains to be seen."

Buy now or wait for lower house prices?

With the housing market hot – and prices soaring – many buyers wonder if they should postpone buying a home until things settle down.

The right time of course always depends on your personal situation. If none of the current homes in your area suit your needs or your finances could use a little work, it might make sense to wait.

But if you're just waiting for lower prices, this is probably not the best idea.

Even at its best, home prices won't fall in 2022. It is much more likely that the current rate of inflation will simply slow down. So if you wait, you won't be looking for lower prices, just prices that are not going up anytime soon.

Remember that residential values ​​have been on a general upward trend for decades. The only times they have decreased significantly have been times of extreme financial hardship (like the 2008 financial crisis).

As Dhingra said, barring a major shock to the economy, current home prices will only rise.

So if you are financially ready to buy and find a home that you like, now is the time.

Stay tuned

Housing construction will go strong in 2022, but nothing is set in stone. Make sure and subscribe to The Mortgage Reports podcast to keep up with the latest in the market as we head into the new year.

Show me today's prices (December 17, 2021)

The information contained on The Mortgage Reports website is for informational purposes only and is not intended to be an advertisement for the products offered by Full Beaker. The views and opinions expressed are those of the author and do not reflect the policies or position of Full Beaker, its officers, parents or affiliates.

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