While we have seen some indications of a cooling housing market as we entered 2022, it certainly hasn’t calmed as much as many industry thought-leaders have anticipated. Now, we are seeing a continued increase in housing prices, but at a significantly slower rate than previously observed. Inventory has shown signs of returning as well (though still far below demand). It has been encouraging for prospective buyers to see the market begin to level out (or at least what appears to be an indication of a leveling out). However, that may not be the case, and at the very least, it won’t be for some time yet. There is also some concern that we may be headed for a recession. Let’s look at a few of the latest industry observations.

Rising Mortgage Rates Will Only Encourage Buyers

As seen in this chart by Freddie Mac, mortgage rates have been steadily rising since December 2021 in an effort to slow the overwhelmed housing market and deter the over-abundance of buyers. Unfortunately, the effort has appeared to have had the opposite effect, spurring potential home buyers to pick up their pace. The concern being as rates rise, their mortgage payments will only get more expensive and their buying power will decrease.

Home Prices are Still Rising, Inventory is Still Declining

The Federal Reserve of St. Louis recently cited an 18.8 percent increase in home prices over the last year, stating this rise is greater than the highest year-over-year rate of 14 percent the country saw leading up to the 2008 housing bubble. This sharp increase was six times that of wage growth. What about inventory? Zillow reported that this time last year, housing inventory was 26 percent below pre-pandemic levels. Now? Housing inventory sits at 42 percent below pre-pandemic levels.

What Can We Expect in the Coming Months?

There are a few predictions for how the housing market will evolve in the near future. Starting with a revised expectation that, while we can still expect the market to cool, it may not do so as quickly as we had originally hoped for 2022. Fortune describes Devyn Bachman’s take, vice president of research at John Burns Real Estate Consulting. Bachman states, as many others believe, that the current tough market will continue through, at least, the spring of 2022.

The Mortgage Reports discusses a few takes on how home prices will evolve, with the general consensus being a continued rise (though at what pace is in question) throughout 2022. The same article suggests we may even enter a recession and see the current interest rate policy significantly slow or reverse.

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