CoreLogic Deputy Chief Economist Selma Hepp offers an updated look at her 2022 housing market forecast.

Big Changes in the Spring

Importantly, the Federal Reserve upshifted its gradual pace of increasing interest rates to a more accelerated pace of interest rate hikes in hopes of reeling in elevating inflation.  We’ve already seen one 50 basis-point hike in interest rates in May and Hepp is betting on a second 50-basis-point rise in June.  After those two 50-basis-point hikes, Hepp foresees 25-basis-point increases through the end of 2022.

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Likewise, the Fed is being more aggressive in reducing its balance sheet on government-backed securities.  This approach is also driving mortgage spreads and rates higher than initially anticipated.

Impact on Housing Markets

In hopes outpacing surging mortgage rates, buyers relentlessly drove early spring homebuying demand forward.  Inventory of available for-sale houses continued lagging.  Competition and bidding wars again spiked with 6 in 10 homes selling at premiums during March 2022.

Hepp believes continued lack of inventory and surging interest rates may curtail demand in the coming months however, she also knows that many buyers can still afford rising homeownership costs.

Those buyers will likely compete for limited for-sale properties against an enlarged investor pool who accounted for 28% of single-family home purchases in March 2022.

Market Considerations

Hepp has revised her initial thinking on home price growth and now believes that home price growth will continue to track a double-digit growth cycle through the remainder of 2022.

CoreLogic’s Home Price Index Forecast is now expecting home prices to rise an average of +17% in 2022.  This continued acceleration in home price growth paired with higher mortgage rates will, more than likely, dampen home sales activity.

Rather than Hepp’s previous forecast of a +1% rise in home sales for the remainder of this year, Hepp has revised that forecast to a -3% decline in home sales activity during the second half of this year.

With interest rates accelerating, Hepp, like other industry experts, is expecting far fewer refinance loan applications given that approximately 90% of currently outstanding mortgages have a rate less than or equal to 5%.  Additionally, Hepp anticipates mortgage holders will trigger more home equity line of credit (HELOC) loans due to increasing home equity wealth.

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Thanks to CoreLogic’s Selma Hepp and HousingWire.

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