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Home Prices, Mortgage Rates Expected To Stay Elevated Through Next Year

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The Housing market A government-backed mortgage lender, Freddie Mac, reported Wednesday that it is expected to cool as demand subsides.

The latest of the company Quarterly forecast We expect 30-year fixed-rate mortgages to average 5.0% in 2022 and 5.1% in 2023, but total home sales will slow from 6 million to 5.4 million.

“The Federal Reserve’s actions to help manage inflation have brought about significant fluctuations in mortgage rates and, by extension, the housing market,” said Sam Carter, Chief Economist at Freddie Mac. press release.. “House prices are growing at a slower rate, but home prices remain high relative to homebuyers’ income. Taken together, these factors exacerbate the affordability challenge and the housing market. It is causing a deceleration. “

In fact, Freddie Mac predicts that house prices will rise by 4% in 2023. This is a relative slowdown from 17.8% in 2021 and 12.8% in 2022. In the first quarter of 2022, the average selling price of US homes was $ 428,700. , according to data The US Department of Housing and Urban Development recorded a 33% increase from $ 322,600 in the second quarter of 2020.

“The housing market has previously experienced a boom and bust,” Heritage Foundation researcher Joel Griffiths told The Daily Wire. “But current housing costs are at record highs in terms of inflation-adjusted prices and prices relative to median household income. Last year, interest rates more than doubled, making typical residential housing. Loan payments have increased by more than 50% in many parts of the country. “

Indeed, a 30-year fixed rate mortgage has begun climbing According to the beginning of 2022 data From Freddie Mac. Starting at just over 3% in January, mortgage rates in June approached 6% and settled at 5.5% as of Thursday.

Griffith pointed out financial stimulus from the Federal Reserve as the driving force behind the turmoil in the housing market. Central banks lowered interest rate targets in response to recession due to COVID and blockade Mortgage mortgage securitiesDespite continued rise in home prices, it leads to lower mortgage costs.

“The current plunge in affordable housing prices is primarily the result of continued large government subsidies to the housing market and is purchased by the Federal Reserve, thanks to mortgage giants Fannie Mae and Freddie Mac. Combined with the trillions of dollars in mortgage-backed securities, “Griffith continued. .. “To restore affordable housing prices, we need to reduce the footprint of government and central banks and reduce restrictions on new housing supplies. Otherwise, housing prices are within reach of too many families. Expect it to remain absent. “

On the supply side, the construction of new long-term housing Already slowing down Over the last few decades — there are too many 6 million homes on the market. As supply chain problems caused by the global blockade prevail, the cost of wood, steel, copper and other raw materials begins to rise, and labor shortages allow contractors to work on housing projects. The number of contractors has decreased.

“Housing inventories have recovered somewhat from their lows earlier this year, but future inventories will depend on housing permits granted at the local level, borrowers holding access to credits, and more affordable prices. I will, “says Griffith. “Affordability works in two ways: to allow new buyers to enter the market and to allow sellers to buy new homes (often larger) at reasonable prices. . “

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