Home prices were up 18.8% in 2021, and while expected mortgage rate increases might slow down demand, available inventory remains low, keeping it very much a seller’s market.
“With home prices expected to continue rising, even at a slower pace, affordability will increasingly challenge 2022 buyers as a decade-long underbuilding trend has left the housing market 5.8 million homes short of household growth,” Realtor.com economist Danielle Hale told CNN. “At the same time, we expect pandemic trends like workplace flexibility and competitive labor market conditions to give workers the boost in income and wider search areas they need to navigate a still-challenging housing market successfully.”
The record rise in the Home Price Index came on the heels of a 10% hike in 2020, and homes sold for 25-plus percent more than the previous year in the South and Southeast. All 20 cities in the December index saw home prices rise to record levels, led by Phoenix, Tampa, and Miami.
Rates on 30-year fixed mortgages have risen to 3.92%, the highest level since May 2019.
“Things aren’t going back down,” DLB Financial Services CEO Debbie Boyd told Yahoo Finance. “So we have to quit thinking this is a bubble and just start thinking that this is it now. This is the real thing.”
Boyd said there would be at least three and perhaps four rate hikes in 2022 as the Federal Reserve tries to tamp down inflation. While they will shake up the market, buyers should keep things in perspective, she said.
“We are used to now historically low interest rates. I remember when I got a 5.50% rate several years ago, like 10 years ago, and that was a great rate,” Boyd said. “So it’s all in what we’re used to. We’ve forgotten that rates were higher than 2% at one time.”
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