Real Estate Market Predictions For The Second Half of 2022

Real estate market stock

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Whether you’re looking to buy a home to live in yourself or you’re a real estate investor looking for an income property, it’s important to know what to expect from the housing market during the second half of 2022. For many buyers, higher mortgage rates so far mean they can no longer afford homes in specific ranges. The challenge is that even modest single-family homes cost as much as lavish pads did a few years ago, so buyers are struck either waiting for more inventory to come online or moving to a more affordable area.

Here are the real estate market predictions for the second half of 2022.

Rapid Shifts in Economic Landscape Will Affect Real Estate  

The rapid shifts in the economic landscape have some silver lining when it comes to housing affordability. With the unemployment rate near 50-year lows, employers are feeling the pressure to compete for talent, driving wage growth upwards from earlier year-over-year predictions (+3.8% vs. +3.3%). The labor market recovery continued with a net 390,000 jobs added to payrolls in May as the Fed ratcheted up its monetary normalization, consumer confidence dipped, and inflation remained a top concern.

The competitive labor market may also give some buyers more negotiating power on workplace flexibility, creating more opportunities to relocate to relatively affordable housing markets. Data from the first quarter of 2022 showed about 40.5% of Realtor.com home shoppers viewed listings that were located outside their current state, up from 33.4% in 2020. 

Home Prices Will Remain High 

Since the housing inventory isn’t expected to pick up all that much during the second half of the year, home prices are likely to remain elevated. Essentially, this means many buyers, especially first-time buyers, are apt to struggle to break into the market, especially in light of higher borrowing rates. As of May, the national median existing home price for all housing types was $407,600, with sales declining in three out of four regions of the US. 

Home Sellers Face More Competition, but Buyers Get More Options 

Homeowners continue to be in an advantageous position, especially those who have owned for longer periods of time and accumulated significant equity in their homes. This is likely to bring out more sellers hoping to capitalize on favorable market conditions which will ultimately mean more competition. There will be a re-balancing of the housing market away from the very seller-friendly tilt it has recently had. 

This will bond particularly well for seller-buyers who have been more frustrated with the lack of buying options. Seller-buyers are not immune from the challenges all buyers face, such as higher home prices and mortgage rates, but home equity insulates them from some of the impacts, particularly those who have lived in their homes for longer periods. 

Rising Rents Hurting First-Time Buyers 

First-time buyers aren’t seeing equity and wealth grow due to the rising cost of everyday essentials. For these buyers, the challenging housing market is compounded by the fact that rising rents are making it difficult to save up for a down payment. The rise in rent is making it difficult for first-time buyers because in some months they have paid double digits for a studio to two-bedroom properties. Currently, there is an increased motivation to get into a home and lock in housing costs to prevent having to pay higher future rents. 

Generally, 2022 reflects a housing market that is charting a path toward sustainability. Buyers will have to be patient and prepare to be flexible at a time when homes are hard to come by, prices are way up, and borrowing is no longer as affordable as it was in 2021. Home sales are still projected to hit a near record-high despite trailing 2021 levels.  

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