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The supply of home listings has never been so low. Prices are still increasing by double-digit percentages annually, and mortgage rates are going up as well.
“It’s going to be a tough market for buyers,” Gay Cororaton, a senior economist at the National Association of REALTORS®, told realtor.com®. “There are more bidders than houses out there.”
Last year, mortgage rates were at record lows and helped to offset higher home prices. But this year, rates are rising above 4% and impacting borrowers’ mortgage payments. Still, some buyers who are financially ready may find an opening in the market as other aspiring house hunters find themselves priced out.
“People who are just at the margins of being able to afford a home will think twice about buying,” Cororaton says. “The upper-income brackets will be the ones jumping into the market. It just makes it all the harder for the lower-income folks.”
Housing inventory levels are expected to rise from record lows over the coming months.
“We’re going to see a bit more inventory and somewhat fewer home shoppers,” says Danielle Hale, realtor.com®’s chief economist. “But that might not be until the later part of the spring.”
However, Len Kiefer, deputy chief economist at Freddie Mac, believes it could take between four or five years to fully ramp up enough housing to meet demand. Builders are facing multiple challenges, like labor and lot shortages and growing material costs that are preventing them from adding more inventory.
But buyers may actually find rising mortgage rates a relief in some ways, economists say.
“Mortgage rates will be both friend and foe to buyers this year,” says Hale. “Monthly mortgage payments will be higher. However, those higher monthly payments are likely to knock some home buyers out of the market. You may see somewhat less competition.” Read more on the latest mortgage rates.