Nov 23 2021

Market Update Heading into 2022

Let’s look at the current situation and break out our crystal ball, with some help from the insight of experts.

Whether you’re a first-time buyer or a seasoned homeowner looking to refinance, knowing the state of the mortgage market is important. Let’s look at the current situation and break out our crystal ball, with some help from the insight of experts, to predict how the market trends will move.

Increased Rates Are Likely on the Horizon

Recent signaling from Washington, D.C. suggests that the Federal Reserve will increase interest rates; few industry leaders suspect that the historically low mortgage interest rates we’ve seen over the past year will hold. Factors like the debt ceiling and the ever-looming specter of rising inflation suggest that now is a good time to get in on a good mortgage rate.

Both thirty-year-fixed and fifteen-year fixed mortgage rates have seen incremental rises of late, not raising any alarm bells, but pricking up the ears of those who watch the market carefully. Often carrying higher interest rates with smaller monthly payments, thirty-year-fixed mortgages have averaged at around 3.2% approaching 2022, while fifteen-year-fixed loans, with higher monthly payments, have been in the 2.5% range. With rates currently inching up, these deals won’t likely be around in the first quarter of 2022.

So what should you expect the housing market to do in 2022?

That answer first bears a look back at 2021, which had plenty of pitfalls for both first-time and veteran homebuyers. The housing market outpaced the overall economy, creating a super-charged environment with bidding wars on homes and a record escalation of prices. Low mortgage rates and low housing supply created conditions ripe for high home prices. But things won’t stay red hot forever, so we’re likely to see home inventory increase and the fierce competition of late decrease.

Then are we making a steady march from a seller’s market to a buyer’s market? Economists say not so fast. Yes, we will see a rise in the number of available homes. Also true, buyers will find favorable financing options and mortgage rates in the near future. But neither reason is apt to cause a seismic shift in the housing landscape. Rather, housing market predictions say we’ll see a more balanced environment where buyers are better positioned in 2022 than they were in 2021.

2022 Looks to Be the Old Normal

As the coronavirus pandemic upended nearly every aspect of life over the past year and more, the housing market, too, was out of whack. Buyers were paying way above asking prices and dizzying numbers of offers would descend on homes. Experts predict we’re going to see a return to the normal way of doing business, with buyers making opening bids that are below asking prices — how, historically, things are usually done.

From the buyer’s perspective, the current outlook of the market is something of a good news/bad news situation. On the plus side, increased housing inventory means increased choice. But if you’re betting that this drop in competition will lead to a drop in prices, you’re probably wrong. Analysts, including CoreLogic, predict that we’ll still see moderate rises in home prices despite the moderate decrease in demand. But the “bad” news isn’t all that bad — this rise in home prices looks like it will be at a slower pace than the increases we saw in 2021.

Will the low mortgage rates hold?

Probably not. The record low interest rates we saw in 2020 and 2021 have only one way to go: up. The Federal Reserve is suggesting a shift in its purchasing of mortgage-backed securities, which has helped to keep mortgage rates low and stable. Nobody has a crystal ball to divine how high mortgage rates will rise, but Freddie Mac forecasts that rates could get close to 4% in 2022.

A New Generation Discovers the Suburbs

Walk through the downtown of almost any major city in America and you’ll see wellsprings of urban renewal; this suggests cities are the hotbeds of homeownership going forward. But the data suggests otherwise. Findings by industry experts such as predict that the suburbs are where we’ll see the biggest growth in mortgage lending. And for that, we can largely thank one group: millennials. They’re not so young anymore, with millions of millennials now in their thirties and looking to start families. That means they’re turning to the suburbs for good schools and more space to spread out with the kids.

AI Tech is Speeding Things Up

Gone are the days when a prospective homeowner was limited to the listings of a local real estate agent. So too we say goodbye to breaking out a calculator with a pen and paper to figure out mortgage payments. Artificial intelligence has changed all that and shows no sign of slowing. It’s not that AI is doing anything much different from traditional techniques, say, in refinancing mortgages or in doing home searches. It’s the stunning speed and breadth at which AI works that’s so revolutionary. From evaluating a home’s price compared to others in the market, and across other markets, to predicting the likelihood of a sale and calculating a range of mortgage options, AI can do it all in mere seconds.

Climate Change Will Have Its Say

Recent findings by the Research Institute for Housing America of the Mortgage Bankers Association suggest that climate change will impact the mortgage industry. The ever-increasing extreme weather events we’ve seen will almost certainly continue, and will likely get even more destructive. We’re going to see more damage to homes and lenders will be taking this risk into consideration. This could very well mean we’ll see some form of the controversial practice of blue-lining, where mortgage lenders draw lines, literally or figuratively, around neighborhoods with higher risks due to natural disasters, rising temperatures, or other climate-related factors.

But there’s no reason to fear the future of the mortgage market. Some fluctuations and concerns aside, mortgage rates are relatively low, the housing supply seems steady, and so far there doesn’t look to be anything catastrophic on the horizon to sink an overall sunny outlook.

Considering buying a new home or refinancing? Contact us today.

These days, more and more people are looking to buy their dream homes, especially as remote work and work-from-home setups have become an enduring trend. A 15 point increase in requests for home tours and other home-buying services, along with a 11% rise in Google searches for homes, indicate an uptick in demand to buy houses in the country. However, there is a definite worry about affordability when it comes to housing, especially as hefty price tags on available residences have kept the market just as competitive as before, if not more.

According to the latest reports from analysts, it’s not all bad for existing homebuyers and aspiring house hunters. As previous data shows, timing matters in the housing market, and working on different approaches to home buying – like through a reliable lender – can help advance you towards more affordable housing goals. Below, we discuss whether house hunters should buy now or wait, and why.


What is your financial situation?

Counter to the rise in home demand, there is a considerable lack of supply. Along with rising prices and interest rates, the housing market may seem like a highly competitive space with wealthy homeowners fighting for what little property is left. It can be overwhelming, but knowing where you stand financially can help you better strategize your home buying journey. Following the four key components of affordability, ask yourself:

  • How much do you have saved for a down payment?

  • How much does your household earn?

  • What debts do you carry?

  • What is your credit score?


Familiarizing yourself with these components will help inform your decision on whether or not to wait. For example, taking the time to improve your credit scores before committing can save you from higher interest rates in terms of your monthly mortgage payments. Alternatively, many young homebuyers are compromising by living with family for a significant amount time to save up for a down payment. Getting this out of the way when you’re able to can help you get better loans to buy sooner than later in case interest rates end up increasing.

What kind of home is best for you?

Buying a home is a huge purchase and a big commitment. With shifts to digital and remote ways of working taking place in recent years, this has provided homebuyers with opportunities to be more flexible when buying homes. Homes in areas away from busy cities and urban hubs, for example, are considerably cheaper. This makes them a perfect option for buyers who work from home, or aren’t required to be present in the office on a consistent basis.

The lifestyle you expect to live is as much a factor to consider as money. Condos and townhouses offer lower maintenance costs in the long run, and are perfect for smaller households when compared to single-family homes. If the household grows, homebuyers looking for a side income can even invest in renting out purchased properties to passively earn back what they spent and look into bigger properties for family use.

What does the future look like?

In a previous post, we talked about the rising mortgage and interest rates. While the market may seem bleak or intimidating in its current condition, housing experts also believe factors such as supply have a high chance of returning to pre-pandemic levels by the end of 2024. If you are financially able, buying now while others may be intimidated by the prices can give you an edge. Conversely, taking some time to get your finances in order can benefit you when it comes to securing better loans and lower interest rates.

Working with experts can help you make better decisions for the loans you need, making sure you don’t get trapped with high interest rates or hidden charges. The future of fintech suggests that big data is the future of loans, as more online lenders are now using algorithms, which predict potential defaults better than FICO scores do. Data is also leveraged precisely to identify customers who fit various products well — which can give you peace of mind, as an aspiring borrower. Here at City Lending for example, we find the right programs to fit your needs and profile, making sure you get some of the lowest down payments and interest rates along with a premium service.

And if you’re still unsure, it’s worth considering that waiting it out in the market’s current wild conditions could result in even higher interest rates in the future. At the end of the day, buying a house is ultimately a huge investment, which comes with benefits such as privacy and a financial investment that for the most part will weather most economic storms.

Find out if this is the right time for you to get a house by contacting one of our loan officers today.


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Written by Alicia Christopher

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