- The housing market is frozen, and affordability is unlikely to get better soon, experts told Insider.
- Activity has slowed thanks to high mortgage rates, which have pushed both buyers and sellers out of the market.
- But rates are likely to stay high as the Fed keeps an eye on inflation.
The housing market is frozen as mortgage rates and home prices stay high, real estate experts say – and while affordability should improve slightly, it's unlikely to get significantly better anytime soon.
Despite a slight softening of mortgage rates and home prices in recent months, neither are likely to drop significantly within the next two to three years, Bankrate mortgage analyst Jeff Ostrowski told Insider. That spells trouble for younger home buyers who have been locked out of the market.
That's largely because the Federal Reserve is expected to keep interest rates high over the next year, which will influence mortgage rates to stay elevated.
High mortgage rates, meanwhile, will prevent existing homeowners from listing their homes, as many financed their purchases years ago when rates were historically low, and to sell now could mean financing a new purchase at a higher rate. This is likely to keep inventory low and home prices elevated.
"Nobody's really expecting a big drop in mortgage rates," Ostrowski said, forecasting rates to stay between 5%-6% over the next year. "It's a tough market where there are going to be more buyers than sellers for the foreseeable future. And when that's the case, it's hard to see prices really fall."
Redfin deputy chief economist Taylor Marr attested to the stagnant housing market, predicting mortgage rates would only slightly ease to about 6% by the end of the year. Meanwhile, home prices have largely bottomed out, he estimated, with only a small fall left before they hit a trough in June.
"It feels like prices aren't really changing much and interest rates aren't changing much," Marr told Insider. "We've been describing it sort of like a game of musical chairs, where most participants are just in their seats, and once people start to get up out of their seats, that's where there will be affordable housing opportunities."
Housing in limbo
It's a precarious time for the US housing market, with activity slowing significantly in recent months as the Fed aggressively hiked interest rates. As the rate on 30-year mortgage — the most popular US home loan — sticks close to 20-year highs while prices are stuck at elevated levels, affordability has been crushed for many prospective buyers.
Though some experts sounded the alarm last year on a massive decline in home prices, low inventory has kept them up.
The result has left the market in a state of limbo, with both homebuyers and sellers unwilling to enter the market unless mortgage rates head lower.
"A year ago it was insanely unaffordable. And maybe now it's just a little less insanely unaffordable," Marr said.
Though some pockets of the housing market have seen a meaningful enough drop in home prices to revive sales, affordability issues are currently holding back 73% of prospective American homebuyers, Bankrate said in a recent report.
Mortgage rates — and likewise, home affordability — will hinge on the Fed's future interest rate moves and any subsequent volatility in rate markets. Fed Chair Powell has suggested rates will stay elevated all year as the central bank keeps an eye on inflation, while markets are eyeing strong odds that the central bank could cut rates as soon as its July meeting.
Business - Latest - Google News
May 13, 2023 at 09:17PM
https://ift.tt/u0KqQGe
The housing market is frozen and affordability isn't getting better soon - Markets Insider
Business - Latest - Google News
https://ift.tt/k6MKHcw
Bagikan Berita Ini
0 Response to "The housing market is frozen and affordability isn't getting better soon - Markets Insider"
Post a Comment