Will The Housing Market Crash?
It appears that we are currently experiencing a real estate inventory bubble, with buyers paying too much for homes sold in hot real estate markets, paying too much for their mortgages, and investors competing for the money from homes sold for too much.
Call it the Hot House Price Summer, as inflation, high housing demand, and a limited supply continue to drive up prices. It is anticipated that home prices will decline, but not collapse. The upcoming rapid correction is largely due to the recent spike in mortgage rates. Home prices are expected to correct.
If the economy grows quickly enough, rising mortgage rates will have less of an impact on home values and prices. You may be priced out of the slower-moving real estate market if interest rates continue to rise and housing prices do not decline sufficiently to offset higher mortgage costs.
High Demand, Low Supply In The Housing Market
As there is more demand than supply, house prices rise very quickly, making it impossible for buyers to purchase a home. This could cause a collapse in the housing market. Unemployment is at its lowest level in 54 years, making it easier for homeowners to upgrade or hold onto their current homes; if they are among the 85 percent of owners with mortgages at less than 5 percent. Many homeowners have decided to hold onto their homes instead of purchasing a more expensive home with a higher-interest loan.
The lack of available homes on the market, a major factor in the rapid rise in housing prices prior to the COVID-19 pandemic, persists, as home-builders abandon plans for large developments and homeowners choose to remain in their current residences rather than accept higher mortgage rates.
After adjusting for home prices, tighter lending standards, and the declining glut of unsold homes, average 30-year fixed mortgage rates remain near historical lows. Since August of 2021, mortgage rates have roughly doubled, prompting some housing economists to forecast modest price declines. If you’re thinking about purchasing or selling your home, contact us.