The Cost of Buying a House in 2021 versus 2022

January 22, 2022

If you’re thinking about buying a home, you may be wondering if you should hold off and let things cool down a bit or if you should get moving now. There’s no doubt about it: 2021 was one of the hottest sellers’ markets in U.S. real estate history. Spurred largely by the pandemic, markets across the country were characterized by skyrocketing home values, rock-bottom mortgage interest rates and some of the lowest inventory levels in decades.

So, is it better to buy a home now, right when 2021 has drawn to a close, or should you bide your time and wait until later in 2022? To help you make this decision, we’ve created an infographic highlighting the cost of buying a home in 2021 versus buying one in 2022.

house buying cost 2021 vs 2022

As you can see, you should probably consider buying sooner rather than later. For one thing, home prices are expected to continue rising in 2022 – albeit more slowly than in 2021. Therefore, a home valued at $800,000 now will probably cost closer to $848,000 later this year. At the same time, mortgage interest rates will almost certainly increase over the next 12 months. If they hit an average of 3.53%, as anticipated, the cost of financing a home will be even higher.

According to the infographic, if you buy a home right now for $800,000 at the current average rate of 3%, your monthly mortgage payment will be around $3,370. If you hold off until later in 2022, when home values will have appreciated and mortgage interest rates will have increased, your mortgage payment will be more than $3,600 per month.

By purchasing a home now, then, you stand to save upwards of $230 per month versus buying toward the end of 2022. Over the course of a year, you’ll save more than $2,750 by acting now instead of later.

Home Appreciation Rates are Expected to Keep Rising Throughout 2022

Now that 2022 is here, experts have weighed in with their projections for how the U.S. real estate market will behave over the next 12 months. Although house prices aren’t expected to appreciate as quickly or dramatically as they did in 2021, appreciation rates are expected to remain strong throughout the year.

Three reliable sources have weighed in regarding home appreciation rates in 2022. Fannie Mae expects real estate to appreciate at a rate of 7.4%, Freddie Mac anticipates a rate of around 7% and the Mortgage Bankers Association predicts a rate of 5.1%. The figure used in our infographic is based on the average of these three estimates, 6.5%. In other words, if you wait until the end of the year to buy a home, its sale price will be 6.5% higher than it is now.

Mortgage Interest Rates Will Be Higher By the End of the Year

In 2021, mortgage interest rates held steady at near-historic lows. The average rate hovered at right around 3% throughout the year, making it incredibly affordable to finance home purchases. Unfortunately, low inventory levels prevented many buyers from taking advantage of those low rates.

The Federal Reserve has already announced that it will almost certainly increase rates in the months ahead. The same three organizations highlighted above all expect mortgage interest rates to increase in 2022. By the fourth quarter of 2022, Fannie Mae expects an average rate of 3.4%, Freddie Mac expects an average rate of 3.7% and the Mortgage Bankers Association predicts an average rate of 47%. Our infographic uses the average of these predictions, 3.7%, to calculate the cost of buying a home toward the end of 2022. If you purchase a new home later this year instead of now, you will pay an average of 0.7% more to finance that purchase through a mortgage. That may not sound like much, but it can add up considerably throughout a 30-year home loan.

Other Factors to Consider When Buying a Home in 2022

Like many people, you may have held off on buying a home last year because of the sheer competitiveness of the market in 2021. Unfortunately, things aren’t likely to calm down any time soon. In addition to costing a lot more, buying a home later in the year could be even trickier thanks to factors like inflation, low inventory and supply chain issues.

Want to Buy a Home? Do It Soon to Save Big

Although 2021 is behind us, many of the factors that made it such a crazy year for real estate will continue well into 2022. Home prices will keep rising, although more slowly, and inventory levels will remain low. Mortgage interest rates will increase, making it more expensive to finance the purchase of a new home. With these points in mind, act now to save big on purchasing a new home. BCP can help, so contact us today for more information.