After 2021 marked the largest home price gains on record, home prices seem poised to continue to grow in 2022.
In 2021, the median sales price for a home rose to $346,900, up 17 percent from one year earlier, a gain of $50,200 for the average homeowner in just one year. Many economists cite this latest price increase as an all-time record. Home values could be considered even stronger than they were back in the days of subprime lending.
But reasons for the current rising home prices are different this time than during the crisis that led to economic collapse 15 years ago. Congressional reforms enacted in the wake of the 2008 recession help ensure that people can actually afford the home loans they get. But the biggest reason for Home prices rising so fast in recent months is because there is a major shortage. December 2021 marked an all-time inventory low and there still seems to not be enough homes available for sale.
While low interest rates have played a big role in driving demand, the Mortgage Bankers Association forecasts that those headwinds should diminish as rates for a 30-year fixed-rate loan increase to 3.5 percent in the second quarter of 2022 and rise to 3.7 percent in the third quarter.
Finally, by the end of this year, rates are expected to reach 4 percent.
But will this prove to finally slow this “hotter than ever” housing market? Will the inventory shortage catch up? Only time will tell.
Source: Greater Illinois Title Co. Real Estate Digest, March 2022