Buying a House in 2022: What to Expect

It was tough out there for home buyers in 2021. Shoppers scrambled to find properties and battled in bidding wars while prices shot up across the country.

Economists expect the market in 2022 to be a tad gentler. But chasing the homeownership dream will still require strategy and stamina.

“Competition in the 2022 housing market will continue to feel like preparing for an Olympic sport,” says Christian Ross, real estate managing broker for Engel & Volkers Atlanta.

Here’s what to expect and how to prepare.

More buyers than homes for sale

A healthy real estate market has about six months of unsold inventory, Ross says. That means it would take six months for all the homes on the market to sell at the current sales rate. But unsold inventory nationwide was less than half of that in recent months, according to National Association of Realtors data, and even lower in sizzling markets, such as Atlanta.

A glimmer of hope: Real estate industry groups expect the supply of for-sale homes to increase in 2022.

“With more housing inventory to hit the market, the intense multiple offers will start to ease,” Lawrence Yun, the National Association of Realtors’ chief economist, said in a recent press statement.

Todd Luong, an agent with RE/MAX DFW Associates, already sees this trend. He says he’s noticed an uptick in pending transactions in the Dallas-Fort Worth area and expects a slight improvement of inventory.

But buyers will keep outnumbering sellers. “It’s still going to be very, very competitive,” he says.

Home prices will rise, but not as quickly

Home prices are expected to increase year-over-year but at a slower pace than in 2021.

The National Association of Realtors projects home prices will increase just 2.8% in 2022, far less than the estimated 14.7% gain in 2021.

Other experts’ predictions vary, but the projected percentage gains are still in the single digits. Fannie Mae projects a 7.4% increase. Freddie Mac pegs it at 7%, and the Mortgage Bankers Association projects a 5.1% bump.

Mortgage rates expected to increase

Average mortgage rates remained at historic lows in 2021, with the average 30-year fixed-rate hovering around 3% at the end of the year.

Economists forecast that rates will increase in 2022, but it’s important to keep that in context. Even if they go up as projected, they will still be fairly low.

Yun of the National Association of Realtors projects the 30-year fixed mortgage rate to rise to 3.7% in coming months. The Mortgage Bankers Association projects an increase to 4%, while Fannie Mae and Freddie Mac project the 30-year fixed will average 3.3% and 3.5%, respectively.

Tips for buying a house in 2022

Given the hot market, here’s how to prepare and compete.

First, shop lenders and get preapproved

“We always recommend getting in contact with a lender as soon as possible, not just to apply but to understand … the process,” says Kevin Parker, vice president of field mortgage originations at Navy Federal Credit Union.

Lending criteria vary by the type of mortgage and lender. Down payment requirements could be as low as 3% for some conventional loans. But putting down more than required has advantages, especially in a seller’s market. A higher down payment can give sellers confidence that your loan will close, which may increase the chances of getting an offer accepted.

Rates and fees also vary. When comparing, ask lenders for closing cost estimates, Parker recommends.

Once you have your finances in order, apply for a mortgage preapproval. A preapproval is an offer from a lender to loan you a specific amount under certain terms. Real estate agents will require that you’re preapproved before showing you homes.

Apply with more than one lender and compare loan estimates to choose the best deal. A loan estimate is a standard form that lenders are required to provide applicants. The form breaks down loan costs, including the interest rate, monthly payment and closing costs.

Get a good local real estate agent

An agent’s expertise in the local area is critical in this market, says Dana Bull, an agent with Sagan Harborside Sotheby’s International in Boston’s North Shore area.

Experienced local agents know what’s going on in their communities, and they share information with one another. Bull says recently a family member decided to buy a home in another area. Ordinarily she would have represented him, she says. But given the hot market, she referred him to an agent in that town.

Set realistic expectations

“The best way for buyers to avoid getting discouraged or give up altogether is to manage their expectations,” Ross says. “Understanding from the onset of their search that they need to start earlier, consider homes that may need some cosmetic updates and understand that they may have a 10-plus offer experience before closing on their home will be helpful.”

Know what you want and can offer

Before shopping, know the maximum offer you’re willing to make, how the offer will be structured and the terms you’re willing to negotiate, says Josh Horner, an agent with RE/MAX Masters in Salt Lake City. The process will be less messy if you prepare.

“It’s like taping a house before you paint,” he says.

Target properties that are priced under what you’re qualified to buy so you have room to negotiate, says Otto Catrina, a San Francisco Bay Area agent and president of the California Association of Realtors.

Decide what you need, and what you can live without. A house may have “old pink tile and linoleum” but still be a nice, structurally sound home, Catrina says.

Bull says you’ll likely face less competition for fixer-uppers. “Ask yourself, ‘What does this house offer? Can I turn it into what I want over time?'”

Be vigilant and patient

“For buyers that are on the hunt, you have to be just as vigilant as your real estate professional,” Ross says. Network to let people know that you’re house hunting and the kind of property you’re looking for.

Bull hears some buyers holding off, thinking there will be a surge of properties coming on the market later. “But it’s unrealistic to think things are going to do a 180,” she says. “Start sooner than later, and give yourself a long lead time. It could take a week, but it could take months and months.”

Hang in there. Even in the tough 2021 market, “all of our buyers found what they were looking for,” Horner says.

Frequently asked questions

Where do I start when buying a house?

The first steps to buying a home include checking your credit score, setting a down payment goal and shopping for a lender to find the best mortgage for you.

How much money do you need to buy a home?

The amount you need to save for a house will depend on home prices in the area where you’re planning to buy. Typically, you’ll need money for a down payment, closing costs, and moving and other expenses after you buy the home. The required down payment for a conventional loan can be as low as 3%, depending on your credit score and income. Closing costs are usually about 2% to 5% of the loan amount.

What is the best credit score to buy a house?

Credit score requirements vary by mortgage and by lender. Typically, you can qualify for the best mortgage rates with a credit score of 740 and above.

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