Gone are Uber’s low mortgage rates for 2021. In fact, average fixed 30-year mortgage rates have risen from about 3.5% to about 5.6% this year, and professionals say they expect them to rise even more (see Lowest Mortgage Rates You Can Get it now here). One might think that these higher rates would help dampen home price growth, as families are less likely to be able to afford a mortgage, but is this true? And what else happens with housing prices? We asked five positive people to rate them.
Prediction 1: A shortage of inventory means that home prices may continue to rise
The supply of homes available for sale is so low that a significant drop in demand as a result of rising prices will not turn this into a buyer’s market, say the professionals. “Home prices will continue to rise as there are not enough homes to meet demand, but the combination of higher home prices and higher mortgage rates means that fewer people will be able to afford the purchase,” says Holden Lewis, a real estate and mortgage expert at Nerdwallet, who expects Mortgage rates continue to rise but at a slower pace than they have over the past few months (see the lowest mortgage rates you can get right now here). That means demand is likely to decline in the fall and winter, although home prices will continue to rise, albeit more slowly, Lewis says.
Prediction 2: Cash buyers still play a big role in this housing market – meaning prices don’t have as much of an impact as you think
“Roughly 30% of transactions are in cash, so there is a large pool of buyers who are not affected by the interest rate,” says Greg McBride, chief financial analyst at Bankrate. This means that higher interest rates will not have as much of an impact on this housing market as one might think.
Prediction 3: Demand will remain high and so will home prices
Rapidly rising mortgage rates have had a negative impact on mortgage demand since the start of the year, but there’s no sign of a drop in demand, says Jacob Channel, chief economist at LendingTree. As of April, the Mortgage Bankers Association projected that mortgage facilities would total $2.58 trillion in 2022, down 35.5% from 2021. While this is a significant drop, it’s important to note that if mortgage facilities total $2.58 trillion. , they will remain. higher than in 2019. Meanwhile, data from the Census Bureau and HUD indicate that the median home price for new residential homes in March 2022 was higher than in March 2021, despite higher rates. “This suggests that people are still willing to pay top dollar for homes even in an environment of rising prices,” says Lewis.
The cost of financing a typical home for sale has increased dramatically in the past year, prompting many shoppers to rethink budgets and potentially taking some families out of the home-buying market for now, says Realtor.com economist Danielle Hill. But at the same time, a large number of young families still want to own a home and feel the urgency of finding a home and fixing the price before mortgage rates and home prices go up again (see the lowest mortgage rates you can get right now here) . “Combine these adjustments with changing financial conditions with the still-large share of households in prime home buying ages and long decades under construction in the housing market that has left the market in short supply, which is a recipe for keeping prices high,” Hill says.
At the end of the day, home buying demand has so far remained resilient in the face of rapid price hikes and recent interest rate gains, both of which limit what home buyers can afford. “There will be a point where costs become too high for many and price growth begins to slow, but we are far from anything resembling a normal market by pre-pandemic standards. There are far fewer homes for sale than the market would normally expect at this time of year, and homes continue to be Selling remarkably quickly. Zillow economists expect home values to grow another 14.9% over the next year,” says Matthew Speakman, chief economist at Zillow.
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Prediction 4: It may take a major event to send home prices down
Ultimately, in order to drive up prices to blow up home prices, we must see much less demand and much more supply of housing than we currently see, say the professionals. “Even if price growth has been subdued this year, all of the current data is that home prices are unlikely to fall so hard. Except for the kind of large-scale mortgage default that led to massive home sales like what we saw before the financial meltdown. For 2008, or mortgage rates suddenly skyrocketing to the double levels of the early 1980s, home prices seem high, Lewis said.