Why it was harder to buy a house in January 2022 than in 2021

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The start of the year was particularly difficult for buyers.


Key points

  • Mortgage rates increased in early 2022.
  • This, combined with low inventory and high home prices, has made buying a home even more difficult.

At the end of 2021, the 30-year mortgage rate was below 3.4%. By the end of the month, rates were approaching 3.8%. That’s a pretty substantial jump for a one-month period, especially after a year where mortgage rates haven’t budged much month-over-month.

It is for this reason that January has been one of the most difficult months to buy a house since the start of the pandemic. And if mortgage rates continue to rise, borrowers could face even more difficulty in February – and throughout 2022.

January was tough for homebuyers

It’s not just that mortgage rates skyrocketed in January; house prices also remained quite high and inventories remained low. These factors combined to make it a tough month for homebuyers, especially first-time homebuyers on a budget.

To be clear, home prices were high throughout 2021 and inventory was very limited. But at least mortgage rates were low enough to help offset the higher prices being presented to buyers.

Although today’s mortgage rates are still quite competitive on a historical basis, they may not be low enough to offset rising home prices. Many buyers who have delayed buying homes in 2021 may find that 2022 is by no means a better time to navigate the housing market.

Will mortgage rates continue to rise?

Chances are that mortgage rates will continue to rise as 2022 progresses. Hopefully we won’t see rates rise as quickly in the coming months as in January. If that were to happen, rates could easily reach the 5% mark by the middle of the year.

Last year, the Mortgage Bankers Association predicted that the 30-year mortgage rate would drop to 4% by the end of 2022. Based on recent movements, it seems more than likely. But it remains to be seen whether the rates are well above the 4% mark.

Nevertheless, it should be noted that the Federal Reserve plans to raise rates this year. Although the Fed does not set mortgage rates or consumer interest rates, its actions can influence mortgage rates and cause them to rise.

Should we give up buying a house in 2022?

Not necessarily. Although mortgage rates may end up being higher than expected, remember that rates in the 4% to 5% range are not very high from a historical perspective. And one thing that higher rates could do is lower house prices.

The only reason prices have been so high is that demand has been high. But if rising rates cause buyers to flee, home prices could begin to fall to more subdued levels, offsetting the higher rates.

Ultimately, buyers will have to see how things play out in the housing market as 2022 progresses. But if you’re hoping to buy a home this year, don’t assume it’s not possible because mortgage rates are rising. Instead, work on saving as much money as possible for a down payment while taking steps to boost your credit score so you can qualify for the best mortgage rates mortgage lenders are willing to offer you.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are, interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.

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