The U.S. Federal Reserve recently announced a raise for short-term interest rates of half a percentage point. Subsequently, mortgage rates are expected to continue their rise as the Fed continues to attempt to fight inflation.
On the surface the continued rise in mortgage rates spells bad news for would-be home buyers but it’s not all negative. It’s worth keeping in mind the increase we’re seeing in mortgage rates means buyers will end up paying hundreds more for their mortgage payment each month but long-term, the benefits outweigh the short-term difficulties. That hefty mortgage is very likely to not be affordable for a majority of families looking to buy and while that doesn’t sound very good for the housing market, it means demand will decrease. With so many families looking to buy and not enough homes for all of them, a decline in demand is exactly what we need to bring prices back to Earth. For now, as long as inflation remains out of control, we may see rates continue their rise.
There is a caveat
Prices may not dip but if they follow the pattern we’ve been seeing, the rate at which they increase will continue to slow as the cost rises beyond many buyers’ financial limits. However, it is still possible for the median price of homes to continue their rise, even at a slower pace, as investors that don’t need to rely on mortgages continue to buy.
Another consideration is a deeper decline in inventory as those looking to downsize aren’t able to sell because purchasing a new home would be out of reach with a new mortgage. Not only that, but how will would-be sellers feel about selling their homes for less than their neighbors did just a few months prior when they had prospective buyers entering bidding wars and offering tens of thousands over asking price?
One thing is for sure, the challenges of today’s real estate market are not letting up. The circumstances may have changed, but instead of reprieve buyers are now faced with a brand-new set of difficulties to overcome. For many, the question now is whether to wait it out or jump in before conditions worsen. What do you think?
You can stay ahead of the curve
Regardless of what turn the real estate market takes, The Warren Group has a myriad of Data Solutions to keep you and your team in-the-know. Keep up with the latest real estate listing data, be the first to learn of the latest pre-foreclosure and foreclosure information, get unmatched insight into today’s nationwide building permit data, and a lot more. Take a minute to explore all of the data sets and market intelligence you could add to your toolkit to stay ahead of the competition, then talk to one of our data specialists to find a plan that works best for your business needs.