Real estate experts say higher mortgage rates, low housing inventory face buyers in 2022

BRYAN, Texas (KBTX) - Whether it’s from the increase of people working from home or those global supply chain issues, the housing market has seen plenty of volatility from the pandemic over the past couple years.

Buying and owning a home is one of the major pillars of the American dream, and the pandemic has only made it more difficult to navigate the market. As we begin a new year, experts say rising mortgage rates are one of the big forces facing prospective homebuyers.

Luis Torres is a research economist at the Texas A&M Texas Real Estate Research Center.

“Compared to last year and the year before that where you had historical lows, now you’re going to start to see those increases, and the major reason is inflation that is going to drive up mortgage rates.”

Torres says mortgage rates reached their highest level since March 2020 last week, and he thinks that may be a big reason buyers should be patient when looking to buy.

“It affects affordability, and it increase the cost of purchasing a house, and that should slow down or weaken demand somewhat,” Torres said. “Affordability is the major issue we’re going to face here in Texas. We’re expecting both the Texas economy and the economy here in Bryan-College Station to continue to grow at a strong pace, and that’s attracting other businesses and people to our state.”

Despite that, Torres says it’s still a really strong market.

“It’s difficult to find a house right now,” Torres said. “The inventory, or stock of homes available for sale, are still really, really low.”

Wendy Flynn is a local realtor who recognizes inventory remains significantly low, but she has a different outlook for homebuyers thinking about making a purchase.

“I would encourage buyers to make their purchases before interest rates do start that increase, simply because they want to be able to get in when the rates are low,” Flynn said.

Flynn says median home prices have increased by about 25% from 2019 to 2021. She says first-time homebuyers will likely need to save up more for a down payment and prepare to offer above the list price.

“I think that we will continue to see a very strong seller’s market throughout 2022 because the inventory levels have been so low for so long, there’s a lot of catching up to do,” Flynn said.

Flynn and Torres agree it’s definitely a seller’s market right now, but there is a bit of a catch to that. It’s not the traditional seller’s market so many are used to.

“The problem now with inventory so low, yes, you’re going to make good money, but where are you going to move to? What house are you going to find?” Torres said. “You’re probably going to pay a higher price for that house.”

“What people often say is the market that you sell in is the market you buy in. While you may be able to sell and get a very high price for your home, higher than you ever imagined, you will see on the buying side that you will have to pay more,” Flynn said. “One of my rules for real estate is don’t make your clients homeless. I make sure with our clients that we always know where they’re going to end up.”

That’s why Flynn says the people who are really benefitting from the current market are those who are selling and moving to another city and those who are downsizing. She says they can sell at a high price and then buy a lower-priced home.

Torres believes the market will have that time to catch up. He expects the increasing mortgage rates to slow down the housing market by easing the demand, and he thinks it will cause the market to move toward a more normal, pre-pandemic trend by the end of this year or early 2023.

“The price growth of homes, or how much it increases, that should decrease and go back to more normal levels,” Torres said. “Before the pandemic, College Station had around a 4% year-to-year price growth. Right now, it’s basically double that. The growth should slow down back to the more normal trends.”

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