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Bay Area Home-Price Forecast for 2022 Hints at Cooling Market

Key highlights from this report:

  • Bay Area housing market forecasts for 2022 predict rising prices
  • But we might see a cooling trend, in terms of annual price growth
  • Even so, the real estate market will remain competitive in 2022
  • Home buyer demand continues to exceed the available supply

It’s a new year, so a lot of home buyers and sellers are wondering what’s in store for the San Francisco Bay Area housing market in 2022. Will the market shift in some significant way? Or will we see a repeat of last year?

One forecast predicted that we could see slower home-price growth in 2022, compared to last year. But due to the ongoing supply shortage, the Bay Area real estate market could continue to favor sellers over buyers.

A ‘Cooler’ Home-Price Forecast for the Bay Area in 2022

The San Francisco Bay Area real estate market has been red-hot over the past year and a half. For many months now, home buyers have been competing fiercely with one another for limited inventory. Among other things, this has sent house prices north and supply levels south.

While the supply-and-demand situation hasn’t changed much in recent months, we could see a cooling trend this year in terms of annual home-price growth.

This month, the real estate data company Zillow predicted that house values across the Bay Area would rise more slowly in 2022 when compared to 2021. During the first week of January, the company’s website stated the following:

San Francisco-Oakland-Hayward Metro (94146) home values have gone up 17.0% over the past year and Zillow predicts they will rise 9.9% in the next year.

While this would mark a slowdown or cooling trend for Bay Area home prices, it would still be above-average growth from a historical standpoint. If this prediction turns out to be accurate (or even close), it would suggest that the Bay Area housing market is inching toward normalcy. At least where prices are concerned.

But some aspects of the local real estate scene could remain the same in 2022. For instance, the ongoing inventory crunch could mean that the Bay Area housing market will favor sellers for the foreseeable future. In fact, that’s exactly what many real estate professionals are currently predicting.

‘Seller’s Market’ Conditions Persist, According to Agents

Toward the end of December,¬† published a report that suggested a continuation of “seller’s market” conditions across the Bay Area. According to that article, many local agents expect the housing market to lean in favor of sellers during 2022 (as it has over the past year).

To quote the December 29th SFGATE article:

Every real estate agent we spoke with agreed that 2022 is still likely to be a seller’s market in the Bay Area. Even as interest rates are projected to go up, the demand for homes will still be greater than the inventory…

Of course, this doesn’t mean home buyers should just give up on their purchasing plans. Buyers can still succeed in today’s highly competitive housing market. What it does mean is that you’ll need to bring your ‘A’ game when attempting to buy a house in the Bay Area during 2022.

If you plan to buy a home in the area this year, be sure to research your local real estate scene. You want to know how quickly houses are selling, what the inventory situation is, and what kind of sale prices you can expect. An experienced agent can bring you up to speed on these and other real estate conditions.

Related: Will California remain a seller’s market?

Mortgage Rates Remain Favorable for Buyers

Let’s end with some good news for home buyers. If you’re planning to buy a house in the Bay Area during 2022, you could still capitalize on historically low mortgage rates.

Last week, the average rate for a 30-year fixed mortgage loan was 3.11%. This is based on the weekly national survey conducted by Freddie Mac.

Rates have risen a bit since a year ago, when 30-year mortgages were averaging around 2.67% nationally. But they are still very low from a historical standpoint.

Of course, we don’t now how long rates will hover within their current range. Some forecasters expect them to inch upward during 2022.¬†According to a December 30, 2021 statement from Freddie Mac:

Mortgage rates have effectively been moving sideways … This is because incoming economic data suggests that the economy remains on firm ground. While we do expect rates to rise, the push of the first-time homebuyer demographic that’s been propelling the purchase market will continue in 2022 and beyond.

So overall, the Bay Area housing market of 2022 could look a lot like 2021. Especially when it comes to supply and demand. There’s not enough of the first, and plenty of the latter.

But we could also see some changes within the Bay Area real estate scene over the coming months. In 2022, home-price growth is expected to slow down compared to the past year’s gains. And mortgage rates could trend upward as well.

Disclaimer: This article includes predictions issued by third parties not associated with our company. They’re the equivalent of an educated guess and should be treated as such.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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