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Last month, our Spring Market Update brought news about rising prices and interest rates, experts’ inventory predictions, and an update on supply and demand.
According to Bankrate, mortgage interest rates continue to hover between five and six percent, home prices remain high, and supply is still relatively tight compared to pre-pandemic levels as of June, 2022. Bankrate is expecting the market will stay high because of an increased urgency to buy for millennials entering the market and those who waited to buy during the pandemic.
Potential buyers are worried about interest rates, but is their fear misplaced? The National Association of Realtors (NAR) predicts about five more rate hikes to the Fed Funds rate this year in response to inflation, job creation, and the nation’s economic growth. As the Federal Reserve tries to combat inflation, mortgage rates may continue to rise. When inflation is low, rates tend to trend lower. When inflation is pushing high, so do fixed mortgage rates.
The good news? The Federal Reserve is able to use both the Fed Funds rate and their monetary policy to help inflation ease and begin to return to a better and more sustainable figure.
In the latter half of May, homes that sold were on the market for a record-low median of 15 days, down from 19 days in 2021, according to Redfin. June is expected to be the busiest month for the market. The NAR believes the housing market will continue to outperform compared to pre-pandemic, despite existing home sales dropping since March.
If you’re looking to purchase a home, be prepared for a fast and aggressive market as there are significantly less homes on the market today than pre-pandemic levels. Black Knight, a software, data, and analytics company, reported that active home listings are about 67% below pre-pandemic levels, with 820,000 fewer listings than should be typically available as we enter the latter half of the year. Experts are predicting more homes to enter the market in the third quarter of 2022, which may help ease the current shortage.
Affordability continues to be the biggest concern for first-time homebuyers. Black Knight reported home prices and interest rates have made for the worst home affordability since July 2006. According to the Balance, home prices were nearly 20% higher than they were in Spring 2021.
The short answer is no. Even with a huge demand for homes, there are banking and lending legislation and regulations that have been set in place since the 2008 market crash to ensure a housing bubble will be less likely to occur. Demand will most likely remain high, given the number of potential buyers in the market.
At the time of the market crash, many buyers were victim to predatory lending practices, lax spending standards, and excess debt in asset markets, according to Bankrate. There was also a tremendous lack of equity during the last crash whereas nationally, the amount of equity people have from homeownership is at an all-time high. Today’s buyers are more qualified to purchase and sustain their purchase, which leads to fewer foreclosures. First-time homebuyers are also more protected against unsuitable mortgage products and purchasing homes they could never afford.
The market does have a chance to stabilize before 2023 if:
Working with experienced experts, such as your Real Estate Agent and your Loan Originator can give you a major advantage in the current market as they are armed with the latest tools, technology, and inside market knowledge. When you’re ready to make your home dreams come true, contact us today.
Sources: Bankrate, The Mortgage Reports, Black Knight, The Balance, Redfin
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