7 Reasons to Now Fear the Pain of Housing Market Prices Fall in 2022

A housing bubble is when housing prices are unusually high, spurred by high demand and low supply, investor speculation, and irrational spending.

Reasons to Fear a Fall in Housing Market Prices in 2022

1. High Mortgage Rates

According to Freddie Mac, the average 30-year mortgage rate is around 4.67%, the highest since 2018. The anticipation that the Federal Reserve will continue to hike interest rates is the main reason for the increase.

2. Inventory Picks Up

The cause of the present housing crisis in the United States is supply and demand. The basic principle of supply and demand is that the less of anything consumers want, the more they are ready to pay.

3. Declining Confidence

According to a February 2022 Fannie Mae survey, 70% of consumers believe now is the wrong time to buy a home. Only 43% of respondents believe home values will rise in the coming year, while 58% believe mortgage rates will increase.

4. Softening Of Home Prices

Despite the market’s recent weakening, price rises and bidding wars continue to rage across the United States. And, whatever cooling comes next year, the industry consensus is that it will slow, but not stop, the ongoing rise in property prices.

5. FOMO (Fear Of Missing Out)

An increase in property prices generates a fear-of-missing-out surge of enthusiasm among new investors and more aggressive speculation among existing investors. The “fear of missing out” (FOMO) drives the stock market to heights.

6. Inflation

People have less discretionary money to spend each month because of the rapid rise in inflation, and people’s earnings and weekly income are not increasing at the same rate.

7. Riskier Mortgages

If lenders relax underwriting standards, higher-risk mortgages can create a housing catastrophe. Lending restrictions can be given in bulk to home buyers who cannot afford homes or for home sales when the houses have higher prices than their market value.

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