Historic Highs for Mortgage Rates: Believe It or Not, There’s a Silver Lining
2022 has provided a curious housing situation: The combination of high mortgage rates, steep home prices and low inventory has resulted in one of the biggest seller’s markets in history.
As Forbes reported, the median existing home price was $384,800 in September, which is down from $413,800 in June (a record high) but still up 8.4% from last year. In mid-April 2022, economists were predicting end of year rates between 4.8% and 5.5% for a 30-year fixed mortgage. Today, the rate sits at 7.41%, rising from 7.10% a week ago.
A large number of potential home buyers have been priced out of the market as a result.
“We know that buyers in today’s housing markets are facing significantly higher costs — with the monthly mortgage payment for the median listing-price home up nearly $1,000 per month,” said Danielle Hale, chief economist at Realtor.com. “Many buyers cannot navigate the housing market in the face of these higher costs.”
But as Hale and others have noticed, signs pointing to a healthier housing market are starting to appear — and it seems more likely that the housing market is going to cool rather than crash.
According to Realtor.com, list prices remain high and are still up by 13.3% compared to the same time last year. But nearly one-fifth of sellers slashed their prices in October, more than twice the number who cut prices a year ago.
Additionally, more homes are hitting the market. Low inventory has been a persistent problem since the 2008 housing crash, when the construction of new homes dropped. Per Realtor.com, even though listings have decreased 15.9% year-over-year, October listings increased by 33.5%.
Real Estate Market Could Improve in 2023
Many are predicting a rosier housing picture for 2023 due to simple economics. As House Digest reports, the current high mortgage rates and home prices have forced potential buyers to shy away from closing a deal on a house. In turn, a decrease in competition should prompt sellers to lower excessive asking prices to get more offers.
While acknowledging that home prices might take time to fall nationally, relief may first come to markets outside the large metropolitan areas and in select markets experiencing lower priced homes and better job prospects, per CNN Business.
Hale agreed. “Shoppers are often looking in markets where housing is more affordable as a work-around for higher housing costs,” she said. “The West and South are surging in particular because these markets were some of the tightest over the past few years.”
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