Those who’ve been waiting for the housing market to cool down may find themselves in murky waters yet again — just in a different way. Though home prices are predicted to fall by 8% next year, high mortgage rates and a looming recession will continue to hinder affordability, according to a new report from Capital Economics, an independent research firm.
Other economists have projected a much steeper drop in home prices — as much as 20%.
But even more aggressively falling prices are directly tied to aggressively rising interest rates, and because of this, homes will remain unattainably expensive for many. And it seems that just when one thinks interest rates couldn’t get any higher, they do.
Earlier this month, the Federal Reserve hiked rates by half a point to a range of 4.25% to 4.5% to help counter inflation, and the Fed has pledged to make more increases in 2023.
Furthermore, as interest rates rise, there is no guarantee that home prices will drastically drop, despite some predictions that they will. Some experts reckon that home prices will soften in the new year by only a small amount.
“You have this continued pressure around purchasing that even if we see dips, I think you’re going to see enough demand on the dips to keep home prices from going down by any true measure,” Nicole Rueth, producing branch manager with the Rueth Team of Fairway Independent Mortgage Corp, told Time.
More From GOBankingRates