Higher Rates and Short Supply: The State of Real Estate in 2022

Midway through 2022, the real estate market is adjusting to a new reality: mortgage rates have surged and inventory remains stubbornly low. Here's what's happening and what it…

Midway through 2022, the real estate market is adjusting to a new reality: mortgage rates have surged and inventory remains stubbornly low. Here’s what’s happening and what it means for buyers and sellers.

Rates Have Jumped

At the start of 2022, the average 30-year fixed mortgage rate was around 3.1%. By mid-year, it had climbed past 5.5% — a dramatic shift that reduced buying power significantly. A buyer who could afford a $600,000 home at 3% may only qualify for $490,000 at 5.5%.

Inventory Remains Tight

Despite fewer buyers in the market due to higher rates, there still aren’t enough homes for sale. Many homeowners are “locked in” to low rates from 2020–2021 and are reluctant to sell and take on a new, higher-rate mortgage. This rate lock effect is suppressing the number of listings.

Prices Are Stubborn

You might expect prices to fall sharply with higher rates. But with so little inventory, prices remain elevated in most markets. Some overheated metros are seeing modest corrections, but the national picture is one of price stabilization rather than decline.

What Buyers Should Know

• Pre-approval is more important than ever — know your budget before you search
• Adjustable-rate mortgages (ARMs) may offer lower initial rates for those not planning to stay long-term
• Buy for the long term — over time, rates come down and you can refinance

What Sellers Should Know

• Homes are still selling, but the frenzy is cooling
• Proper pricing is critical — overpriced homes will sit
• Pre-inspection and staging still pay dividends

The market is adjusting, not collapsing. Opportunities exist for both buyers and sellers who go in with realistic expectations and the right guidance.