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Fears of recession may bring relief to buyers, experts say

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Recession fears may not be the solution to rising mortgage rates.

“The impact of the Fed’s anti-inflation strategy is most evident in the housing market, where prospective buyers have fallen sharply and sales have slowed,” said Taylor Ma, deputy chief economist at Redfin.

Ironically, Ma added that “a new fear of a recession may be needed” to actually bring some relief to potential homebuyers facing it. best mortgage interest rates Since 2008.

“Seller” sign (Tim Boyle/Getty Images/Getty Images)

Data from government-backed mortgage buyer Freddie Mac showed average 30-year fixed-rate mortgages surpassed 6% in the week ended Sept. 15.

Inflation hits rental market as mortgage rates rise, limited supply pushes prices higher: REAL ESTATE EXPERT

The Federal Reserve is Trying to Restrain decades of high inflation Without triggering a recession through a series of aggressive rate hikes. This month the central bank raised its target rate by 75 basis points. The rate hike was his third straight rate hike by the Fed, following June and his July hike. The move pushes the key indicator, the federal funds rate, between 3% and 3.25%, the highest since before the 2008 financial crisis. It is also the fifth consecutive price increase this year.

With interest rates rising steadily, current homeowners are reluctant to buy new homes. Current interest rates are also discouraging renters from converting to homebuyers.

US homes for sale

Home for sale June 23, 2009 in Geneva, Illinois. (Photo by Reuters/Jeff Haynes/Reuters)

Both trends keep the supply of available housing low. Redfin data showed 1,767,543 homes sold in the US in August, up 3.4% from a year ago. The number of new listings was 590,549, down 19.1% year-on-year.

“As a result, home sales prices have been rising in recent weeks,” Ma added.

Moreover, some economists said the average long-term US mortgage rate, which rose to 6.29% last week, may exceed 7%. Lawrence Yun, chief economist at the National Association of Realtors, expects mortgage rates to hit nearly 7% in the coming months.

Is the current housing market slowdown the same as the 2008 crash?

Compass real estate agent Daniel Karp told Fox Business, “Rising interest rates will force markets to reset to a new normal, and leverage will continue to shift from where we were to buyers.” Told.

Some buyers have put their searches on hold due to rising prices, Fear of recession looms“Those who can tolerate uncertainty have real opportunity in this market,” he added.

california house for sale

A “For Sale” sign is posted in front of a home in San Rafael, CA on March 18, 2022. (Justin Sullivan/Getty Images/Getty Images)

Karp predicted that sales volumes would continue to decline, forcing sellers to lower their prices.

But this means buyers have more options, more time to make decisions, and ultimately “more bargaining power,” Karp said.

Six months ago was a different story.

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due to high demandsome buyers missed their chances in the bidding war,” he said.

If interest rates fall next year and financial markets improve, “there will be a slump in competitive demand from buyers and prices will rise again,” he added.

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