Mortgage rates, home prices expected to stabilize, forecast says

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The rapid rise in mortgage rates and inflation since the beginning of 2022 is roiling the housing market and the stock market. Fears of a recession and general uncertainty about the economy mean that economists are adapting their forecasts for the year to take into account these changes.

Some changes are expected for the housing market in the coming year, but not all of the changes are negative. For buyers who have been frustrated by the lack of homes for sale and the overwhelming competition for homes, some relief may be on the way. In addition, while mortgage rates and home prices are not expected to drop, they are anticipated to somewhat stabilize. That, too, may bring some relief to buyers who have been struggling to stay ahead of price increases and rising rates.

Realtor.com updated its 2022 housing market forecast and found that calmer waters may be ahead as demand cools and supply increases. The new forecast anticipates:

· Mortgage rates will average 5 percent for 2022 and rise to 5.5 percent by the end of the year. This compares with an original forecast of an average of 3.3 percent and an increase up to 3.6 percent.

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· Buyer demand is expected to cool over the summer, but most markets will remain in favor of sellers.

· Listings are expected to grow 15 percent for this year compared with 2021. The original forecast was for the inventory of homes for sale to rise just 0.3 percent year-over-year.

· Median home prices are expected to rise 6.6 percent year-over-year in 2022 compared with last year, which is far less than the double-digit increases seen this year but well above the original forecast of a 2.9 percent increase.

· Near-record home sales are anticipated for 2022, lagging only behind the number of homes sold in 2021. Still, the new forecast is for 6.7 percent fewer sales in 2022. The original Realtor.com forecast anticipated a 6.6 percent increase in sales compared with 2021.

· The forecast remains the same for single-family home starts, which indicate when building begins on new construction homes, to rise 5 percent in 2022 compared with 2021.

Home buyers continue to shop around for out-of-state homes, study says

While higher mortgage rates and continued price increases for homes will push some buyers out of the market, those who can expand their monthly housing budget, increase their down payment or to find a lower-priced home may find some breathing room during the next six months.

Wage growth and low unemployment are positive aspects of the economic landscape, and Realtor.com chief economist Danielle Hale suggests that competition for employees could make it easier for people to find more flexible opportunities to relocate or work remotely from more affordable housing markets. Realtor.com’s data shows that during the first quarter of 2022, 40.5 percent of shoppers looked for property outside their state, up from 33.4 percent during the first quarter of 2021.

For the full report, visit realtor.com/research/2022-national-housing-forecast-midyear-update.

https://www.washingtonpost.com/business/2022/06/14/revised-forecast-anticipates-housing-market-shift/

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