Those Buying a Home in the Bay Area in 2022 Might Want to Hurry

If you’re planning to buy a home in the San Francisco Bay Area in 2022, and you need a mortgage loan to make that happen, you might want to expedite those plans. Mortgage rates have risen steadily over the past six weeks or so, and additional increase are possible.

Meanwhile, home prices continue to climb in most parts of the Bay Area. This is largely the result of tight inventory conditions and strong demand among buyers.

The bottom line is that housing costs across California could continue to rise. So anyone who is planning to buy a house in the Bay Area in 2022 might want to consider doing it sooner rather than later, to avoid paying more.

A Sense of Urgency for Bay Area Home Buyers?

With strong demand and rising house prices, the San Francisco Bay Area real estate market continues to be a good investment for buyers. But those who are planning a home purchase in 2022 should be paying close attention to a couple of recent trends.

For one thing, mortgage rates have risen quite a bit since the end of last year. According to the mortgage buyer Freddie Mac, the average rate for a 30-year fixed home loan hit 5% the week of April 14, 2022. That was the highest average in more than ten years, and nearly 2% higher than the end of 2021.

According to the April 14 report from Freddie Mac:

This week, mortgage rates averaged five percent for the first time in over a decade. As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation.

We’ve already blown past the rate forecasts issued at the start of the year. In their January 2022 forecast, for example, researchers from Freddie Mac predicted that 30-year mortgage rates would average 3.6% in 2022. Yet here we are with an average that’s now closer to 5%, following six consecutive weeks of increases.

The chart shown above paints the picture clearly enough. This chart was published on April 14, alongside the Freddie Mac rate update mentioned earlier. It shows the average rate for a 30-year fixed mortgage loan going back three years. Note the sharp upward line on the far right.

Home Prices Could Climb Further in 2022

Adding to the urgency, there’s a good chance Bay Area home prices could continue rising in 2022. Some forecasters expect to see a slowdown this year, in terms of price growth. But the ongoing supply shortage could keep house values climbing for the foreseeable future.

According to a February 2022 report from the California Association of Realtors (C.A.R.), the median sale price for existing single-family homes in the Bay Area was $1,200,000. That was an increase of 14.3% from a year earlier.

Granted, no one can predict future pricing trends with complete accuracy. But the real estate market continues to experience an imbalance between supply and demand. That could put upward pressure on house values throughout the rest of 2022.

Related: Bay Area rent prices are rising

Is Real Estate Competition Starting to Ease?

Despite the ongoing rise of housing costs, there are signs the Bay Area real estate market might be cooling down a bit. The pace of homes sales is not quite as “frenzied” as it was a year ago, when bidding wars were the norm.

Earlier this year, California Association of Realtors president Otto Catrina stated:

With prices leveling off, housing supply showing a slight improvement and competition easing during the off season, buyers who missed the opportunity to buy were eager to get back to the market at the start of the new year.

Home sales data for the past year or so also indicate a slowdown in real estate activity. Nine of the ten counties that make up the Bay Area experienced a significant decline in sales over the past year, according to a C.A.R. report.

So the news here is mixed, from a home-buying standpoint. Costs could continue to climb through the rest of 2022, but the overall pace of the real estate market could cool down a bit. Those who are planning to buy a home in the Bay Area in 2022 have a lot to consider — and possibly a reason to act sooner rather than later.