With the end of 2022 approaching, you may be wondering what will happen in the housing market next year and what that means if you're thinking about buying a property. Here are the most recent professional insights on mortgage rates and housing prices, so you can make the best decision possible.

Mortgage Rates Will Continue To Respond to Inflation

Mortgage rates have definitely risen this year as a result of the market's reaction to high inflation. The increases have been swift and significant, with the average 30-year fixed mortgage rate exceeding 7% at the end of last month. In fact, it's the first time in over 20 years that they've risen this high (see graph below):

In their latest quarterly report, Freddie Mac explains just how fast the climb in rates has been:

“Just one year ago, rates were under 3%. This means that while mortgage rates are not as high as they were in the 80’s, they have more than doubled in the past year. Mortgage rates have never doubled in a year before.”

It's difficult to predict with certainty where mortgage rates will go from here because we're in unprecedented territory. Mortgage rate forecasting is far from a precise science, but experts agree that mortgage rates will continue to respond to inflation in the future. If inflation stays high, mortgage rates likely will, too.

As buyer demand has eased this year in reaction to higher mortgage rates, property prices have moderated in several cities. Forecasts for next year are mixed, according to experts. According to the general consensus, home price appreciation will vary by the local market, with more major changes occurring in overheated places. As First American Chief Economist Mark Fleming puts it:

“House price appreciation has slowed in all 50 markets we track, but the deceleration is generally more dramatic in areas that experienced the strongest peak appreciation rates.”

Basically, some locations may still experience slight price increases, while others may experience slight price drops. It all depends on the other factors at play in that local market, such as the supply-demand balance. This could explain why experts disagree on their most recent national forecasts (see graph below):

Bottom Line

If you want to know what’s happening with home prices or mortgage rates, let’s connect so you have the latest on what experts are saying and what that means for our area.