Though not potentially as dramatic as 2020, 2021 was deemed another tumultuous year by housing experts. Fortunately, 2022 is on track and predicted to be more stable than the past two years. However, it is not likely to see the housing market and the broader economy immediately return to pre-pandemic norms.
As the economy was equally hit or miss in 2021, more Americans returned to work—frequently negotiating higher wages, but high inflation offset many gains. The pandemic has also proven to be remaining persistent, even as vaccination rates increase.
The housing market likely will not crash, as home prices have risen since the start of the pandemic. Although some fear the housing market will crash once more like it did in 2008. There is not much evidence to suggest this, as housing market fundamentals— like people’s ability to make their mortgage payments, look to remain strong in 2022.
Home price growth is projected to moderate, and isn’t likely to fall this year in most parts of the U.S. While this won’t fully alleviate affordability issues, it may provide some relief for people who’ve constantly been priced out of their markets. Further, many who recently bought a home won’t need to panic about suddenly becoming underwater on their mortgages.
Prices in the coming year will remain too high for many buyers. Though less drastic price growth will likely make buying a home easier for some, prices are still poised to remain high in 2022. Some who found themselves pushed out of the homebuying market during the pandemic may still struggle to afford a mortgage.
COVID-19 pandemic will still present economic recovery challenges. With the omicron variant leading to more restrictions and shutdowns across the globe, COVID-19 remains a major problem.
- Average mortgage interest rates will rise to near 4% by the end of 2022.
- Interest rates might not get to 4% by the time 2023 rolls around, but they’re on track to rise into the high 3% range.
- Even if rates hit 4%, rates will still be relatively low historically.
- Nationally, average home price growth will be less than 5%.
- Home prices throughout much of the U.S. have risen dramatically since the start of the pandemic, but a greater supply of housing on the market and diminished consumer demand driven by higher rates should result in much less growth this year.
- By 2022’s end, the unemployment rate will drop below 4%, while the labor force participation rate will rise to around 62%.
From the early days of the pandemic through 2021, the unemployment rate dropped from 14.8%—the highest it’s ever been since tracking began in 1948—to just above 4%. Over the same period, the labor force participation rate gradually ticked up from 60.2% to 61.7%. These trends will likely continue in 2022 as people return to the labor market and find new jobs.
With mortgage rates already considerably higher than their pandemic lows, those looking to refinance their mortgage aren’t likely to see as much savings as they would have in most of 2020 and 2021. Rates still remain below where they were before the pandemic, giving homeowners a chance to refinance to a relatively lower rate.
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