The spring home buying season is getting into full swing but many thousands of aspiring home buyers have unfortunately found themselves priced out of the market. With scant home listings available, rising prices, interest rates on the up and bidding wars still commonplace, it’s no wonder many feel like they’re unable to compete.
Still, housing market analysts say they’re optimistic that people in that situation will soon get a reprieve and a possible way into the market as conditions change.
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 said. But Yun also told MarketWatch that he doesn’t believe home prices will turn negative either.
Realtor.com said 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,” said 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 added.