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Homebuyers haven’t had an easy go of it the past few years, but there are signs the peak seller’s market is behind us.

This past spring homebuying season, we’ve seen skyrocketing mortgage rates and rising home values. Both have increased the costs to purchase and own a home. “What we are likely to see is that fewer buyers will be able to afford this housing market,” says Dr. Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. As bad as this situation is for some buyers, it’s a silver lining for those that remain as the competition is expected to moderate this summer.

This summer’s housing market will still firmly be a sellers market. Buyers aren’t likely to have the upper hand in negotiations or have an easy time finding deals. But buyers should have more time to view homes and craft their offers in some markets. 

Less competition doesn’t mean homes prices will drop. Housing inventory is still exceptionally low and demand is likely to stay strong. Rather than seeing prices drop, they are expected to grow, but at a slower pace.

If you’re planning on buying or selling a home during the summer 2022 homebuying season, here’s what three experts believe the real estate market to look like and what you can do about it.

SUMMER 2022 HOMEBUYING SEASON OUTLOOK

• It’s expected to be a strong seller’s market, but cooler than what it has been.
• Home prices aren’t forecast to drop, but are likely to rise at a slower pace.
• Real estate trends are local. Work with an agent that is knowledgeable in the areas you want to purchase or where you’re selling your home.

What Three Experts Are Saying About the 2022 Summer Homebuying Season

Selma Hepp, deputy chief economist at CoreLogic

A slowdown in activity due to higher rates.

Our forecast is for a gradual slowing of home price growth down to single-digit appreciation a year from now, Hepp says. That level of home price growth is roughly half of what we have seen. You’re going to see fewer bidders and homes won’t be selling over the asking at the rate they are right now, she says.

Tendayi Kapfidze, chief economist at US Bank

A strong housing market, but with slower home sales and price appreciation

With low housing inventory, low unemployment, wage growth and a large demographic of buyers entering their peak homebuying years, the housing market should stay strong. However, rising interest rates are, “making things less affordable for a lot of people,” Kapfidze says. This leads Kapfidze to expect slower home sales and smaller price appreciation, but still a very strong housing market.

Dr. Jessica Lautz, vice president demographics and behavioral insights for the National Association of Realtors

Fewer buyers, but low inventory

“We are already starting to see signs that the market is moderating,” Dr. Lautz says. This summer it is likely that fewer buyers will be able to afford a home because of rising interest rates and increasing home prices. While unaffordable housing isn’t a good thing, it does mean that buyers still in the market may have more time to find the perfect home. However, even with fewer buyers, Dr. Lautz says demand will stay strong and inventory will be tight.

What’s Been Going On With Mortgage Rates?

During the first few months of 2022, mortgage rates rose dramatically and now are roughly double the all-time low we saw last year. We weren’t thinking rates would be here, says Hepp. A few months ago, Hepp says she would have forecast rates topping out at 4%. Experts say one major factor behind rising rates is exceptionally high inflation. The most recent data by the Bureau of Labor Statistics shows inflation at 8.3% in April — near the highest level in 40 years. In an effort to rein in inflation, the Federal Reserve has been raising short-term interest rates. With the Fed expected to continue raising interest rates, the mortgage rate markets have anticipated this and are responding with more rate hikes.

Although today’s rates have crossed 5%, this isn’t an abnormally high rate environment from a historical perspective. It was only a few short years ago when a “good rate” was around 5%. 

Preparing to Buy During the Summer 2022 Homebuying Season

Even with a cooling real estate market, the limited housing supply in many areas may not meet demand. As a buyer, you’ll want to be prepared to head into another hot summer homebuying season. Here’s how you can prepare:

Build Your Credit Score

A good place to start is by focusing on your credit score. People often think of the credit score in terms of loan approval, but it also affects your interest rate, Kapfidze says. The higher your credit score the lower your mortgage rate will be. “If you’re still a few months away from buying, you probably have some time to actually improve your credit score,” he says.

Review your credit reports to ensure everything is accurate and all potential issues are resolved. As you’re saving for a down payment, you may also want to pay down revolving debt, such as credit card debt. This would lower your credit utilization ratio and boost your credit score.

Compare Mortgage Lenders

One of the best ways to offset rising rates in the short term is to shop around for your mortgage loan. Don’t talk to just one lender because the spread in mortgage rates can be upwards of 50 basis points (0.5%) between lenders, Kapfidze says. 

With the median home list price in the U.S. hitting $425,000 in April, reducing your rate by 0.5% could easily cut your monthly mortgage payment by over $100. By comparing offers from multiple lenders, you’ll also be able to choose the offer with the smallest amount of upfront fees, which could cut your out of pocket costs by hundreds or thousands of dollars.

Stick to Your Homebuying Budget

Regardless of what interest rate you end up with, having a monthly mortgage payment you can comfortably afford for the long term is vital. Before you start shopping for a house, create a homebuying budget to determine how much you can afford to pay each month, stick to it. Don’t get caught up in the emotional side of things and feel that you have to get this house, Kapfidze says. Going above your budget could create challenges for you in the future. Experts recommend limiting your mortgage payment to no more than 28% of your pretax monthly income.

Preparing to Sell During the Summer 2022 Homebuying Season

Sellers shouldn’t have a hard time selling their homes in this summer’s real estate market. But sellers may need to prepare for the summer housing market by adjusting their expectations.

There are reasons to believe it won’t be as easy for sellers as it was during the last couple of years. Housing inventory is expected to grow and with fewer buyers in the market, “sellers have to contend with the idea that they won’t necessarily be getting that premium [in sales price] that they were expecting,” Hepp says. With that in mind, home prices aren’t expected to decrease, only to rise at a slower pace.

When preparing to list your home for sale, take the local market conditions into consideration. The rise of remote work has shifted demand from large cities to smaller metro areas, so one area could have much different demand than another. Work with a local real estate agent to ensure you’re pricing your home competitively.

A local agent can also help you decide what, if any, updates or repairs to complete before listing your home. “People have been binge watching a lot of HGTV in the last couple of years,” Dr. Lautz says. “They may have expectations that your home is really going to look beautiful and shine.” You’ll have an easier time getting offers for your home if you know what buyers are looking for in your market and you can focus your attention on those things.

How to Compare Home Loans

Whether you are looking to purchase or refinance, you can compare lender offers here using this Home Loan Comparison Tool. You can enter in the loan amount, rate, fees, and term for each offer and see a true side-by-side comparison of your potential monthly mortgage payment and how closing costs, lender fees, and interest rates play out over time with each loan offer.

Home loan comparison calculator

Compare your payment options side-by-side to see which is right for you and your financial situation.

Find the mortgage that’s best for you by comparing the cost of multiple loans over time.

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