12/02/2021 | News release | Distributed by Public on 12/02/2021 10:14
2021 has been an extraordinary year for the housing market: record low interest rates, fastest annual growth in single-family prices and rents, foreclosure rates at a generational low, and the largest number of home sales in 15 years. Home sellers saw a market where their homes sold quickly and often above list price as multiple buyers competed to have the winning bid.
With the Federal Reserve gradually "tapering" its supportive monetary policy, mortgage rates should slowly rise in the coming year: look for mortgage rates to average about one-half of a percentage point higher in 2022 than they were in 2021, or about 3.4%. We expect to see a moderation in buyer demand as the erosion in affordability takes a toll, and additional for-sale inventory to come on the market. With more supply from new construction and existing owners relocating, home sales are expected to rise to the largest number since 2006.
With less demand, we expect homes listed for sale will be on the market a bit longer with fewer competing bidders, which should moderate price growth. The CoreLogic Home Price Index Forecast has the annual average rise in the national index slowing from 15% in 2021 to 6% in 2022.
Rent growth on single-family homes reached the highest ever recorded in the CoreLogic Single-Family Rent Index in 2021 and is projected to slow as additional rentals enter the market.
While we expect home-purchase originations to rise, the higher mortgage rates will reduce refinance originations and alter its composition. Refinance originations will likely have a much larger cash-out share in 2022 with slightly lower average credit scores and lengthening of the average loan term.
Employment and income growth should continue to keep new delinquencies at a very low level. But the end of foreclosure moratoria and the CARES Act forbearance programs will likely result in a rise in distressed sales in 2022, but this increase will be small.
2022 should be a strong year for housing. Look for mortgage rates to rise but remain historically very low, home sales to grow to a 16-year high, price and rent growth to slow, refinance to shift toward cash-out, and delinquency rates to remain low albeit with an uptick in distressed sales.
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