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As the spring buying season kicks off, many aspiring home buyers may find themselves priced out and feel frustrated by the competition. Home prices are higher, as are mortgage rates. Bidding wars remain fierce.
But housing analysts say home buyers may soon see a change and a possible opening for those who’ve been frustrated by the competition and the soaring prices.
The signs may seem dim at the moment: Home buyers are paying about 30% more for a house than they would have just a year ago due to higher sales prices and mortgage rates, according to realtor.com®. Mortgage rates have risen by nearly a point and a half over the past year, which has increased borrowing costs. Mortgage rates, about 3% last year, are now pushing toward 5%.
Lawrence Yun, chief economist of the National Association of REALTORS®, recently said in a statement that “there will be an inevitable slowdown in home sales.” He said people should be watching homes’ days on the market and looking for a decrease in multiple offers as the earliest signs of the slowdown. “Home sellers should not expect big easy profit gains,” he says. But Yun also told MarketWatch that he doesn’t believe home prices will turn negative either.
Realtor.com® says home prices may initially rise over the next few weeks as some buyers rush to snatch up properties ahead of any further rate increases. But real estate experts believe that the huge run-up in prices may be nearing an end.
With higher mortgage rates, “housing is going to have to adjust,” says Danielle Hale, realtor.com®’s chief economist, who adds that she sees uncertainty on how the market will do so, though.
Economic matters are proving to be wild cards for the housing industry. The highest inflation in 40 years is hitting consumers’ pocketbooks. Sixty-two percent of Americans say that inflation has affected their spending, according to the Capital One Marketplace Index.
“Homebuyers have to be able to afford their mortgage payments and all of the other things in their budget, [which is] getting harder to do,” Hale says.