Late 2022 housing market predictions for home buyers

September 20, 2022 - 7 min read

Is now a good time to purchase a home?

As we near the end of 2022, many borrowers and first-time buyers are wondering where the housing market is going.

Typically, home buying conditions improve in fall and winter. However, this year’s inflation and recession could make the landscape harder to anticipate.

The Mortgage Reports spoke to a group of industry experts to break down four major questions for home buyers in the market right now. Here’s what you should know for the rest of 2022.

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Is a recession bad for homeowners?

A recession is defined as at least two consecutive quarters of negative growth in a country’s gross domestic product (GDP). The U.S. entered one after its GDP declined in both Q1 and Q2 this year, according to the Bureau of Economic Analysis.

While it’s common to recall the housing crash of 2008 and draw lines back to that, recessions come in all shapes and sizes. Each has its own set of economic causes and impacts every industry differently. And while a recession may not be good news for homeowners, experts don’t foresee a return to the extreme circumstances around the 2008 crash.

Still, for prospective home buyers, it’s important to weigh what this specific recession means for the housing market.

“If you go back and look at prior recessions, housing prices stayed flat or increased during those time frames, with the exception of 2008.”

–Mark Sheck, branch manager at Cherry Creek Mortgage

Steve Adamo, president of national retail production at Embrace Home Loans

“I think the recession will likely deepen as inflation is not yet under control. In my opinion, the Fed will continue to raise rates as evidenced by recent market reactions to inflation data. The Fed is tightening to get inflation under control. However, the Fed may go too far and will then have to push rates down. Overall, rates are still fairly attractive today for mortgages.”

Ryan Sandler, CEO at Truework

“Generally, it’s hard to say the recession is good for anyone. Interest rates continue to rise but housing prices have not fallen that much. The cost per month to borrow is going up twice as high as it was just six months ago.”

Mark Sheck, Mesa, Ariz., branch manager at Cherry Creek Mortgage

“People get freaked out because they associate every recession with 2008. Not all recessions are created equal. That one was a bit of an outlier and falls in line with the Great Depression. I don’t know if it’ll necessarily be bad for buyers, assuming their employment doesn’t get affected.

When we see interest rates come down, that’ll be beneficial to home buyers. As far as home prices go, I foresee those flattening or even going up slightly. If you go back and look at prior recessions, housing prices stayed flat or increased during those time frames, with the exception of 2008.”

Is the real estate market cooling off?

The housing market is still reeling from the frenzy caused by the rock-bottom interest rates of 2020 and 2021.

As mortgage rates rose this year, affordability fell and reduced the number of active buyers. Higher rates also helped bring more balance to the marketplace. Softened demand has slowed the rate of home price growth, boosted inventory gains, and given buyers some bargaining power.

The question now becomes whether this is a trend expected to continue or just a blip on the radar.

Selma Hepp, deputy chief economist at Corelogic

“High costs of borrowing and high home prices will remain difficult to confront for many potential buyers. However, buyer competition has fallen and many sellers are reducing their asking prices. This is a huge help for buyers who may have been continually outbid in the early months of this year.”

Ryan Sandler, CEO at Truework

“I just saw a stat that one and five homes on the market are being price reduced. That hasn’t happened for quite some time. Anecdotally talking to Realtors, you may still see multiple offers on homes, but not nearly the same number as before. It’s because there are fewer buyers and that brought more normalcy to the space.

Because demand is going down, it’s becoming less competitive to buy. I’d make the argument that you should wait and see [before buying]. Maybe prices have just started coming down and there’s more room to fall.”

Rick Sharga, CEO at CJ Patrick Company

Rick Sharga, EVP of market intelligence at Attom Data Solutions

“Yes and no. Recent inventory gains appear to have reversed themselves over the past few weeks, which means there won’t be an ample supply of homes available for sale. Home sales have slowed down due to affordability challenges exacerbated by rising mortgage rates. Many borrowers have exited the market — at least temporarily — meaning that there should be less competition for those for-sale homes.

On the other hand, as mortgage rates continue to tick up, it gets harder and harder for prospective buyers to afford to buy a home, or even to qualify for a mortgage. And home prices, for the most part, aren’t declining; they continue to appreciate, albeit at a much slower pace. But the supply/demand imbalance suggests prices won’t fall off a cliff anytime soon.

So, easier? Net/net: Less competition, but not enough homes to meet demand, and worsening affordability.”

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How will home buying conditions look this fall and winter?

Typical real estate seasonality says fall and winter offer great opportunities for purchasing a home.

Sellers who list later in the year and those with listings that didn’t sell through the summer are normally more willing to negotiate. It’s also the time when inventory usually peaks, giving buyers increased options and, in turn, diminishing demand.

Should buyers expect conditions to continue improving?

“Seasonality plays an important role in the home buying process and there are typically fewer buyers during the fall and winter.”

-Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors

Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors

“The housing market will be relatively less competitive in the upcoming months. Seasonality plays an important role in the home buying process and there are typically fewer buyers during the fall and winter. In addition, many buyers have already been priced out of the market due to rising borrowing costs. The monthly mortgage payment is about 60% higher compared to last year. As a result, fewer offers are being made on each home. Nevertheless, the market will remain competitive due to tight inventory. Nearly 40% of homes are still selling above list price.”

Joel Kan, associate vice president of industry surveys and forecasts at the Mortgage Bankers Association

“As mortgage rates will likely remain close to current levels throughout the fall and winter, we anticipate the cooling demand and reduced competition for homes could free up some housing inventory and help moderate the rapid home price growth we saw over the past year. All of this will help improve affordability conditions and bring some buyers back into the market.”

Odeta Kushi, deputy chief economist at First American

“The record-breaking house price appreciation nationwide and across markets in 2021 and early 2022 was due to a supply and demand imbalance. There remains a structural and long-term shortage in the housing market, but in some markets the pullback in demand is strong and inventory is rising faster to meet demand in the middle, resulting in a moderation of house price growth. The fall will likely bring with it more moderation, with house prices adjusting to a not-so-new reality of higher mortgage rates.”

Where will interest rates go over the rest of the year?

The mortgage rate rollercoaster of 2022 has not been for the faint of heart. The average 30-year fixed rate mortgage began the year at 3.22% then nearly doubled to 6.02% on Sept. 15, according to Freddie Mac.

As the annual pace of inflation spiked to 40-year highs, the Federal Reserve has taken and plans to take aggressive policy action to reduce it. While interest rates are famously volatile, this caused drastic surges, plateaus, and unexpected drops on any given week.

Many factors will determine how mortgage rates move over the coming months. However, it’s never a bad time to lock in a home loan and buy a house as long as you can afford it.

Steve Adamo, President of National Retail Production at Embrace Home Loans

“I think rates will move within a 25 basis point (0.25%) range from where they are today. The Fed will definitely move its target at the next meeting and likely at the next couple after that. The question is: How much will the Fed move? I don’t see them spurring growth very quickly in the fourth quarter unless inflation gets under control fast.”

Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors

“Unyielding inflation continues to push up mortgage rates, reaching their highest level since 2008. With inflation rising faster than expected, mortgage rates will likely continue to move upwards.”

Mark Sheck, Mesa, Ariz., branch manager at Cherry Creek Mortgage

“I really thought when the interest rate growth started, it’d go to 4.75% or 5.25%. Then they shot past that like it missed the exit on the freeway. I do believe that if some of the inflation numbers peak in October or November, then rates will ease in the first quarter of next year. Even if the Fed continues raising short-term rates, you’ll see long-term rates come down as they see inflation coming down.”

Should you buy a home in 2022?

With the economy mired in a recession and inflation effectively blowing up interest rates, it might seem like a non-ideal time to purchase a house.

However, the market has tipped more in favor of buyers and that should continue as the year comes to a close. Plus, locking in a good rate in today’s market could simply mean shopping around or buying your rate down with discount points.

If you’re ready to begin your home buying journey or are on the fence, reach out to a lender or real estate professional today to figure out everything you need for the process.

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Paul Centopani
Authored By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.