A Scrap of Hope for Distressed Home Buyers

This article was first published on NerdWallet.com.

The first half of 2022 was a catastrophe for home buyers. Skyrocketing mortgage rates and home prices made homeownership unaffordable for millions of renters. At the year's midpoint, the real-estate landscape remains steeply tilted against home buyers. But the terrain may become less hostile to buyers in months to come.

Here’s how we got here and what could happen across the housing market in the second half of 2022.

Rising mortgage rates and home prices

Mortgage rates climbed faster in the first half of 2022 than anytime since 1981. The 30-year fixed-rate mortgage averaged 3.06% in December and 5.66% in June. Mortgages went up in response to rising prices and the Federal Reserve’s policy of trying to control inflation by raising interest rates.

Meanwhile, home prices shot into the stratosphere. The median price of a resold home was $407,600 in May, a 14.8% increase over 12 months earlier, according to the National Association of Realtors.

In the second half of the year, forecasters expect the median existing home price to drop but stay within striking distance of $400,000. The Fed is expected to keep hiking rates, exerting continuous upward pressure on mortgage rates.

Sinking affordability

Sharply higher mortgage rates and home prices have created an affordability crisis.

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