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What Will the Bay Area Housing Market Be Like in 2022?

With all of the interesting real estate trends we’ve witnessed over the past year or so, it’s only natural to wonder about next year. And it begs the question: What will the Bay Area housing market be like in 2022?

We examined current and past real estate trends across the San Francisco Bay Area to get a sense of what it might be like in 2022. Will prices keep climbing? Will supply shortages linger? Let’s explore.

What the Bay Area Housing Market Might Be Like in 2022

What will next year bring, from a real estate standpoint? Here are some very realistic possibilities. We could see higher mortgage rates in 2022, compared to now. Home prices will probably be higher in most cities across the region. And inventory will likely remain a challenge for the foreseeable future.

Here’s a closer look at the trends that might shape the Bay Area housing market in 2022.

1. It could still be hard to find a house, in many cities.

For the past year or so, we’ve seen countless news stories and reports from agents about how hard it is to find a home in the Bay Area. (Hard, but not impossible.) This will likely be an issue in 2022 as well, in most cities across the region

Low inventory conditions could be the number-one factor that drives the Bay Area real estate market in 2022. In a March 2021 housing market report, California Association of Realtors president Dave Walsh said:

While higher rates may slow growth in home sales temporarily, the major roadblock in the long run is a shortage of homes for sale. With inventory dropping more than a half from a year ago, the market will soften in the second half of 2021 if we don’t see enough homes come on the market to meet demand.

An April 2021 report from Realtor.com showed that the total number of real estate listings (homes for sale) in the Bay Area dropped by -12.4% over the previous 12 months. But it also showed a significant increase in new listings during that same timeframe. So we might be witnessing the start of a trend, with more homes coming onto the market.

The bottom line is that low housing supply will continue to affect the Bay Area real estate market in 2022, to some degree. Home buyers will have to remain patient, persistent and flexible.

2. Slightly higher mortgage rates are expected in 2022.

Earlier this year, mortgage rates fell to their lowest level of all time. The average rate for a 30-year fixed home loan dropped to 2.65% during the first week of January 2021.

But starting in February, rates rose for seven straight weeks in a row. As of mid-April 2021, the average rate for a 30-year fixed mortgage was hovering around 3.13% (based on Freddie Mac’s survey).

Rates are expected to climb higher between now and next year. This is another factor that could influence the Bay Area real estate market in 2022.

In a forecast issued on April 14, the research team at Freddie Mac made this prediction:

We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.

If their outlook turns out to be correct, it could have a cooling effect on the Bay Area housing market in 2022. Home prices could rise more slowly as a result.

But this is all speculation at this point. We don’t know for certain what mortgage rates will do (or what the Bay Area real estate market will be like) next year. Still, it’s something worth considering if you’re in the market for a home.

3. Higher home prices likely, except maybe in San Francisco.

Based on current trends, it seems likely that home prices in most Bay Area cities will continue to rise into 2022. The one possible exception could be San Francisco itself.

According to the real estate data company Zillow, the median home value in San Francisco dropped by -3.2% over the past year or so. This was reported in April 2021.

Related: Cheapest places to buy a house

Home prices in most other Bay Area cities (from San Jose in the south, to Wine Country up north) rose significantly over the past year. Some cities in the region even posted double-digit price gains over the past year.

Forecasts for the Bay Area housing market in 2022 predict a continuation of these trends. Home values in most cities across the region are expected to continue rising through the end of this year and into next. But San Francisco is more of a question mark at this point.

4. We could see a new tax credit for first-time buyers.

We might see another tax credit for first-time home buyers introduced later this year. Emphasis on the word might.

President Biden proposed such a credit last year, when he was campaigning. Specifically, he wants the federal government to offer temporary down-payment assistance to home buyers through a “refundable and advanceable tax credit.”

It’s still in the proposal stage at this point, and he has a lot of other priorities. But this is something we could see later in 2021. If such a tax credit does take effect, it would likely increase buyer demand within the Bay Area real estate market in 2022.

Mike Trejo

Mike Trejo

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

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