It’s not a secret, 2021 was a tough year for the average home buyer. Historically low mortgage rates played a significant role in creating a brutal seller’s market. Also, a transition to remote work prompted many new buyers to pursue purchasing their first homes.

The low rates and surge of thousands of new buyers created the perfect storm. There were simply not enough homes to go around. Naturally, the combination of few homes and huge demand created a drastic increase in home prices.

Fortunately, experts are predicting that the market should start to return to normal in 2022. This will likely impact everything from mortgage rates to home values and more.

Top Mortgage Trends for 2022

In order to help you understand what to expect from the housing market in 2022, we have compiled a list of the top trends to watch in the coming year. These include:

 Rising Rates

Most experts believe that interest rates for mortgage loans will increase over the next year. However, these increases will likely be incremental, not drastic.

The current forecasts for 2022 mortgage rates range from about 3.5% to 4% for qualified buyers. A few mortgage professionals estimate that these rates will climb a bit higher than that, but believe that they will then hold steady at about 4.25% by year’s end.

Despite the fact that rates are predicted to rise, these figures are still extremely favorable for buyers. If rates remain at or around 4%, then the high volume of home sales will likely continue.

Stability in Prices

There is an important distinction between a slowdown of price surges and a decrease in home values. The top mortgage professionals are not predicting that home values will decrease in 2022. Instead, they believe that homes will only continue to increase in value by about 5%, give or take.

People who are thinking about buying now or waiting until the latter part of next year should take this prediction into consideration. Putting off home shopping until late 2022 will mean that they will likely end up paying an extra 5% or more for homes. They may also face higher interest rates.

Better Inventory

2022 may bring a better inventory of homes for sale. This increase in inventory could be fueled by several factors. Aging homeowners who are looking to capitalize on the strong seller’s market may make the decision to list their properties. In addition, some investors may begin to sell their rental properties before the market cools.

Will 2022 Continue to Be a Seller’s Market?

Currently, experts are predicting that 2022 will be a better market for buyers. However, there may not be a drastic shift in market conditions. Lenders are not expecting a housing market crash — they are simply optimistic that conditions will normalize as supply and demand start to balance out.

Specifically, financing experts are predicting that the price growth will slow down in the early months of 2022. 

Between the fall of 2020 and 2021, home prices increased by an average of 18%. Some areas saw an even more significant rise in prices. For context, the average increase in home prices year over year is usually only about 5%.