- The housing market is changing rapidly as potential buyers are priced.
- Mortgage rates in the United States have risen to 6% after home prices have risen sharply for two years.
- Experts told insiders what’s happening in the market and where it can go next.
The combination of high prices and rising mortgage rates has thrown a glass of cold water into the once-hot housing market.
House prices in the United States have risen 37% in the two years to March, according to the report. S & P Case-Shiller US National Home Price Index.. on the other hand, National Real Estate Agents Association Due to the combination of higher prices and higher mortgage rates, home affordability is said to be as low as many years ago.
The Mortgage Bankers Association Earlier this month, he said the index of home buying and mortgage refinancing activity had fallen to its lowest level in 20 years.
“Weaknesses in both buying and refinancing applications have pushed the market index to its lowest level in 22 years,” Joel Kang, vice president of economics and industry forecasting for the group, said in a press release.
The last few years have been characterized by soaring prices and bidding wars, as work from home models has become more ubiquitous.Higher income, more mobile workforce on the coast had options Move to the tertiary market, And many have. But at higher prices alone, homes are out of reach for many.
Mortgage rates are also rising now. That is, those who are borrowing money to buy a home have faced much higher interest payments over the last decade, or even earlier this year. And as interest rates rise, it becomes harder for people to qualify for a mortgage in the first place.
Builders and sellers have had great advantages in recent years as potential buyers compete with each other. And now the benefits are shifting to smaller buyers who are still on the market.
Rick Palacios, research director at John Burns Real Estate Consulting, told Insider that the dynamics are turning spring into a dark time for builders.
“All the indicators we see continue to get worse,” he said. “No one expected 5% mortgage rate When this year begins. Absolutely no one expected them to reach 6%, and behold, today we are essentially at a mortgage rate of 6%. It’s a big shock to consumers. “
Palacios, a consulting firm for the homebuilding industry, says homebuyers are very sensitive not only to mortgage rates, but also to the sense of the economy as a whole. But suddenly things look very opaque to some who can still buy.They are reluctant to make life-changing purchases with the highest levels of inflation in 41 years and current official stock inventories.
“Pricing is actually ahead of income,” said Robert Dietz, chief economist at the National Association of Home Builders. “We are seeing perhaps the most significant recession in housing demand since Great.
Dietz, who is also responsible for NAHB’s economy and housing policy, said the surge in mortgage rates caused the market to cool in the spring.
“In a market where resale inventory is scarce, where construction costs continue to rise, and on the demand side where interest expense is rising due to rising mortgage rates, combine all these factors. So, the housing demand is softening. “
That said, he doesn’t anticipate anything close to a crash or burst of a bubble, Views shared by other experts.. According to Dietz, some markets are slowing down new home construction, lowering prices, and identifying previously hot areas, especially mountainous areas. However, investors are likely to support the market and are a factor in limiting price declines.
Palacios is skeptical about that, saying that these investors could withdraw and US home prices could fall into a prolonged slump.
“We don’t anticipate a decline in home prices in the country, but we do predict that home prices will fall nationwide in the coming years,” he said. “There are pockets in the country where we can make a strong claim that home prices will rise by more than 10%, perhaps close to 20%.”
He says that when interest rates soar and the housing market changes, it usually changes in a hurry. In short, builders are much less likely to raise prices for new homes, lowering prices for homes on the market for some time and starting to offer incentives.
“It hasn’t been a buyer’s market for a long time,” he said.