Friday, January 14, 2022 / by Amber Folger
Recent years have indicated that the Housing Market can change its direction very rapidly, leaving consumers feeling helpless and unable to predict the best opportunities to sell their home or purchase a new one. Predicting the future is hard, especially when it comes to the Housing Market and Mortgages. In order to gather the most accurate information possible, I have spent the last few weeks speaking with experts in their field, and pulling research from the most trusted data and analytics platforms in the industry to piece together what 2022 may hold for the Housing Market.
“CoreLogic forecasts that home prices will remain flat in December and appreciate 2.8%
in the year going forward. Yet, they remain conservative in their forecasting and
continue to miss on the low side. For example, CoreLogic had forecasted prices for
November would rise by 0.2% from October and they actually increased by 1.3%.
Even though CoreLogic only forecasts a 2.8% gain in home prices over the next year,
they are certainly the outlier compared to other forecasts. Goldman Sachs expects 16%
gains, Zillow anticipates 14%, and Fannie Mae sees prices rising by roughly 7.5%. Mid
to high single digit appreciation is definitely attainable and is still very meaningful for
wealth creation. For example, a $400,000 home that appreciated by 8% would result in
$32,000 in appreciation gain in just one year.”
In essence home values will continue to rise throughout the year, so do not wait and anticipate home values to decrease this year. This is not the only number predicted to rise in 2022. Interest Rates are projected to level back out by the end of the year, thus making right now the ideal time to purchase your home without losing any purchasing power from those increasing rates.
The exact percentage of rates for 2022 is very hard to predict, but purchasing power remains pretty simple. Let’s say that rates increase by just 1% for consumers, the general rule of thumb is that for every 1% increase, your purchasing power reduces by 10%.
Example: For a $400,000 pre approved consumer, a 1% rate increase would reduce their buying power by $40,000. This leaves the consumer with a $360,000 pre-approval vs the $400,000 they started with.
Now let’s say the interest rate increases by 2% by the end of the year, the buying power is now reduced by $80,000. This may come as a shock, and you may be thinking that this is bad news, however experts say that when interest rates get between 4.00% and 4.50% this indicates a very stable market – something we haven't seen in awhile!
If you are looking to purchase a home this year, NOW is the time to do it. Rates are predicted to stabilize by the end of the year, thus reducing your purchasing power, and the housing market remains on the climb.