What will the 2022 housing market look like? It could 'come back down to sanity'

The Covid-19 pandemic upended the home-buying process. Historically-low mortgage rates coupled with an inventory shortage created a red hot market, with houses selling within hours of being listed, often for well over asking price.

No>Inventory will remain scarce

Even before the pandemic, there was low housing stock in the country. And Covid-19 supply chain troubles and a labor shortage have>Interest rates will rise

The Federal Reserve is expected to raise interest rates a few times in 2022, which means mortgage rates will likely rise. Both Redfin and Realtor.com predict a 30-year-fixed mortgage rate will reach 3.60% by the end of 2022, compared to an average of 3.30% now.

That's not necessarily bad news for buyers, Olsen says. The "silver lining" of higher mortgage rates, she says, is that fewer speculative buyers will be in the market, because there is less money to be made. That could help the average person.

"When you have higher interest rates, it becomes more of the people who buy homes just to live in them," says Olsen. "That's something the market will benefit from, coming back down to sanity."

Prices won't drop

Those hoping competition will slow in 2022 are out of luck, according to economists from Zillow and Realtor.com. Economic trends including tight supply, elevated demand and low mortgage rates will continue to give sellers the upper hand.

Potential buyers can expect bidding wars>Young buyers will be at a disadvantage

Millennials, who are at peak first-time home-buying age, will remain at a disadvantage compared to older generations when it comes to buying a house, says Olsen.

This is not>Buyers should be prepared

All of that said, experts say to be prepared. Do your research ahead of time so you're ready to go when you find the right listing.

"When buying a home in the next year or longer, it will be important to watch new listings, including 'coming soon' listings, and be very prepared to not only visit the home quickly, but prepare to decide and extend an offer almost immediately," Glenn Phillips, CEO and lead economic analyst for Lake Homes Realty, previously told CNBC Make It.

That said, don't overpay. Prices will be up, but that doesn't mean to take something outside of what's reasonable for your budget.

Compare home prices from the prior year in your local area to the listings you are currently considering. If the same type of house is listed for significantly more, it makes more sense to wait for something else.