When will house price growth slow down? Will mortgage rates continue to rise? What should I know if I’m trying to buy a home now? These are all questions we hear from readers, peers and others, so we asked top economists and real estate experts to reveal what they think will happen in the housing market this year.
Mortgage rates may continue to rise – but it depends on the economy
Already this year, average 30-year fixed rates rose to 6% from a little over 3% in January, according to data from Bankrate. And the growth may not stop there. (See the lowest mortgage rates you can get here.)
Danielle Hale, chief economist for Realtor.com, says it depends on a number of factors, including job reports. “If the jobs report is too strong, it could trigger a new hike in mortgage rates in anticipation of a big Fed move.
And until we see lasting evidence that inflation has peaked, there is still concern that mortgage rates will continue to rise, says Greg McBride, a financial analyst at Bankrate. But he added that the prospect of the Fed raising interest rates and doing so sooner could help it keep a lid on mortgage rates, or even lower them. “More rate hikes now mean smaller rate hikes, which means interest rates are going to be higher and that means the rate hikes will happen sooner because of a weak economy,” McBride says.
And here’s something interesting: “Real mortgage rates, which are mortgage rates less than inflation, are negative for the first time in 40 years, so mortgages aren’t as expensive as they seem when controlling for inflation.” “Inflation itself serves as a floor for house price growth, and over the past 40-50 years, most quarters have experienced house price growth faster than consumer price growth,” says Misha Fisher, chief economist at consumer internet services company Angie. With experts selected for home projects and services.
Home price appreciation slows…
“House prices will continue to rise in the coming months due to the housing shortage. “Although inventory is improving, control remains tight as homebuilders reduce production per family,” said Nadia Ivanhelou, senior economist and director of forecasting for the National Association of Realtors (NAR). However, with many home buyers buying due to lower affordability, home prices will not increase as quickly as in previous months. “There will be continued declines in home prices. However, home prices will continue to experience double-digit year-over-year appreciation in August,” says Evangelou.
For her part, Hale said home prices, both median and sale prices, tend to decrease as we approach the end of winter. “I expect this year to be typical in that regard. Beyond the usual seasonal slowdown, home price growth should continue to moderate as the housing market restarts,” says Hale. (See the lowest mortgage rates you can get here.)
… but the overall house price will still increase
Meanwhile, Bankrate’s McBride said the asking price is coming down from the moonshine level as buyers pull back. “When the market cools down, selling prices tend to level off, but this cooling is just a return to the kind of balanced market that’s been in place for the last couple of years,” says McBride.
“I expect home prices to increase in the mid-single digits year-over-year in August,” says Angie Fisher. Among them, common resale indexes like Case-Shiller and FHFA lag a few months so they don’t pick up the latest daily trends. And even though affordability is at a 30-year low, there is still a supply-demand imbalance in housing stock in many desirable metros. Moreover, the decline in housing prices is very common and unless economic conditions force people to sell, they prefer to wait. Moreover, inflation is wild, she added.
Demand is slowing.
Demand is pulling back at today’s prices, and domestic consumers are fewer and farther between than they have been for much of the pandemic, said Zillow Senior Economist Jeff Tucker. “This is cooling the market and pushing it towards the desired balance. Expensive markets, where homebuyers are more affordable and therefore more sensitive to mortgage rate changes, are more likely to slow down significantly, in addition to the pandemic superstar markets that have seen red-hot growth over the past 2 years. says Tucker.
Meanwhile, uncertainty about what the economy holds is growing, so widespread inflation means other essential categories like gas, groceries and utilities are eating up a bigger share of their paychecks, reducing the willingness of buyers to go all in and stretch their home budgets. says Hale. “Regionally, we see the biggest slowdown in the West and South, where both list and sale prices are high and inventory has seen the biggest change so far,” says Hale.
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