What Will Happen to Mortgage Rates, Housing Prices

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Real Estate

What will happen to mortgage rates, housing prices and more this year?

Though housing prices have been rising, mortgage rates have remained near historic lows — some 30-year rates are still around 3% and some 15-year rates around 2%, at least for the time being though many experts think they will rise. That’s leading many Americans to wonder what to do about buying a house now, or selling their existing home using their equity to make a move into a more suitable one while they still can.  My prediction is that the first half of the year will be a busy one.

Mortgage interest rates are likely to rise

As we start to see interest rates rise and with fears of inflation, this trend most likely will continue into 2022. Economists predict rates could slowly rise to 4% by the end of 2022. While that doesn’t seem like a big jump, in fact every ¼ point can have a big effect on a buyer’s payment and qualifying ratios for the mortgage. Overall inflation and the cost of living are also posing some concerns for the coming year as families do their best to stretch the dollar. It remains a big question whether a rise in interest rates and/or inflation will bring down pricing given there is such a shortage of housing supply.  I’m doubtful - at least not yet.

The fast ascent of housing prices will likely slow

Housing prices rose significantly; nearly 20% in 2021 and that fast pace will likely slow, but most are predicting prices are still inching upward. The National Association of Realtors predicts housing prices will climb 5.7% in 2022. That’s a normal increase, but to be fair, some markets may see prices level off if the cost of money increases. But if anyone is expecting pricing to come down significantly, they’re going to be in for a rude awakening. Demand is still very high and therefore without the needed supply, prices will remain on an upward trend. Not to mention that the average rent costs have risen to $2,200 a month, making renters look into buying and investors purchase more rentals.

What about new home construction costs

The unprecedented price volatility in the lumber market dates back to April 2020 when the COVID-19 pandemic took hold and sawmills curtailed production in anticipation of reduced demand. When it became clear in the ensuing months that housing weathered the storm much better than predicted and demand remained strong, lumber mills did not ramp up production accordingly. The most recent lumber price upsurge is due to a number of factors including supply chain disruptions, doubling of tariffs on imports into the U.S. market and the unusually strong summer wildfire season. The recent trend of mill prices—which have more than doubled since late August and are up 37% over the past four weeks, will have an effect on the price of new home construction, as well as any type of remodeling you may have been planning in the near future.

Who had the biggest gains in 2021

Not only was South Lake Tahoe the most popular place overall, but it also earned the No. 1 spot in the real estate marketplace’s lists of “most popular small town” and “most popular vacation town.”  Home values are up 34.9% over last year.  The Bay Area was the winner in biggest gains overall:

  Zip Codes

With those types of gains, you can see why buyers are opting to come to Sacramento.

While my crystal ball is still a bit out of focus, I can say with confidence that this year will bring good sales activity… people are on the move.  Whether you’re planning to make a move yourself or are just curious to know what your home is worth in today’s market, I’m only a phone call away.  My goal is always to help YOU and those you know with all of your real estate needs.

Wishing you and yours all the best in 2022


  Carol Kellogg