In the U.S, 2022 was the first full year since 2020 with the lift of COVID restrictions. While this came as a
welcome relief, new challenges emerged including historic levels of inflation, labor shortages, and an
unusually rocky real estate market.
Last year, the post-pandemic housing market experienced dramatic shifts. Remote work continued to
build once slow markets and define new regional markets. Home prices and equity both rose
exponentially. The refinance boom came to a clear end, with purchase volumes once again outpacing
refinance volumes. Interest rates soared sending low mortgage interest rates to historic highs.
Here’s a breakdown of the wild ride, quarter by quarter.
Q1: A Strong Start
2021 rolled into 2022 with low interest rates in the threes and fours. Properties continued to go well
over asking, contingencies were removed, contracts were written to exclude inspections, and buyers
often paid well over asking price.
● In Quarter of 2022 approximately 2.2 million mortgage loans were originated, down 44.6% from
the previous year.
● That being said, volumes for Quarter 2022 were still above pre-pandemic levels as the average
volume of originations from 2010 to 2019 averaged approximately 1.5 million per quarter.
● Purchase and refinance volumes shifted, with purchase volumes up by 18 percentage points
from 41.6% in Quarter 1 to 59.8% in Quarter 2 (in 2021 refinance accounted for the majority of
new mortgage loans at a whopping 58%.)
Q2: Mad Dash
The spring market was nothing short of a mad dash. An inevitable rise in rates loomed on the horizon,
and buyers competed to get into homes and take advantage of low rates. For sellers, Quarter 2 began
Quarter 1’s high with most still experiencing multiple offers and inflated levels of home equity.
In fact, the median home price in the U.S hit its peak in May at $432,969. This high also meant that
homeowners were experiencing historic levels of home equity.
Buyers in the market continued to struggle with low inventory and sellers’ newfound equity continued
to drive home prices to what many considered to be overvalued pricing.
● In the second quarter of 2022 home equity reached its peak at $11.5 trillion.
● Roughly 84 million consumers have available equity in their homes, with a median equity of
$236,000
● Rising interest rates place additional pressure on the housing market and consumers look to tap
historic amounts of home equity.
Q3: Rising Rates
In an effort to reduce rising inflation, the Fed began to raise rates. Mortgage rates also began to rise and
caused a defined slow down in the real estate market.
Seeking new ways to pay off non-mortgage debt, homeowners began to tap into their home equity
loans and home equity line of credit (HELOC.) The high demand for these types of loans came as
welcome news for investors who began to take advantage of new options and expanded loan programs
from lenders.
Overall, Quarter 3 still ended on a high note for sellers who were still able to sell due to low housing
inventory. As rates continued to rise, buyers were also able to take small wins as their negotiating power
returned.
● Despite an upswing in mortgage rates, sellers only saw an increase of six days on market.
● In the third quarter of 2022 HELOC loans rose 47 percent and home equity loans 43 percent year
over year respectively.
● Each month home sales throughout the country fell from the previous year’s figures, however
the most significant drop occurred in June when sales dropped 30 percent below figures from
June 2021.
Q4: Calm Before the Storm
Quarter 4 began with mortgage interest rates rising to just over 7%, their highest point since 2002. In
November, the national average 30 year fixed mortgage rate sat at 6.8%, up year over year by 3.7
percent.
The upswing was a direct response by the Fed’s effort to reduce historic inflation, which had reached its
highest percentage point since August 1982 at 6.6% from last November. Compared to November 2021,
the inflation rate more than doubled, and many potential homebuyers exited the market for fear of
impending recession.
For those still in the market to buy, relief came just before Thanksgiving with mortgage rates dipping
back down. Interest rates, home prices, and rent prices also began to slow. However, the quarter still
ended with a much slower housing market than usual, even with seasonal considerations.
● Home prices reached a median of $370,700, an increase of 3.5% from 2021
● On average, the number of homes sold was down 35.6% year over year and there were
379,958 homes sold in November this year, down 590,451 homes sold in November last
year.
Despite significant changes to the real estate housing market, multifamily housing demand remained
relatively stable throughout the year proving that investors can still rely on real estate as a hedge in
times of inflation. Similarly, in times of recession real estate still holds strong. Rising mortgage rates and
home prices has led to decreasing affordability, leaving many renters sheltering in place.
Here’s STL Mogul’s outlook and best advice for the first quarter:
Investment real estate will most likely stay neutral. For investors, inventory will play a large role in the
first quarters of 2023; purchases rely on properties that can provide equal or greater return.
Don’t get stuck on the rates – the market is still experiencing historically low rates. Rates are predicted
to drop again in the spring which means that property value will rise concurrently; if that’s the case the
best thing for an investor to do is have property locked up.
As for investors moving into the market in 2023, the best way to position yourself for success is by
systematically investing. Have a plan, whether that means buying on property a year, two a year, or
three a year, and stick to it.