The US housing market has certainly been a wild ride lately, thanks to what seems like countless upheavals. Over the last 12 months, starting with mortgage rate increases precipitated by the US Federal Reserve raising its base rate, volatility has been high indeed. Let’s look at the current state of the housing market and where it might be going in the immediate future.
In the early weeks of 2023, there seemed to be some light at the end of the tunnel. Home lending rates, which had reached a massive high of more than 7 percent, declined slightly to just under 6 percent, and an uptick in market activity led many to believe that the worst of the worst was past us. Yet this optimism was short-lived when the Fed raised rates again in early February, driving the price of lending up yet again.
This frustrated home buyers and sellers alike; borrowers were unable to afford, or even qualify for, the loans necessary to purchase homes on the market, while sellers found the number of buyers willing to pay top dollar for their properties declining significantly once again. The brief respite from doom and gloom soon saw real estate professionals predicting more on the way, with two dozen housing market researchers predicting home prices were set to decline through the rest of the year.
While things have seemed grim recently, there are glimmers of hope on the horizon for the housing market. We’re undoubtedly going through a strong correction at the moment, but we will be coming out the other side eventually. First and foremost, upward pressure on mortgage rates is likely to decline and possibly even cease as the Fed indicates base rate hikes will begin to reduce in both frequency and severity. This will calm lenders; while we’ll never see ultra-low mortgage rates the likes of which we saw in early 2022 again for many a year, the current high of more than 6.7 percent will be a thing of the past eventually.
Secondly, the downward pressure on home prices will also likely stabilize by the end of 2023 as well. These two factors will combine to create a much more stable housing market overall that is less prone to rampant and unsustainable growth as we experienced during the post-pandemic housing boom. Slow, manageable growth is better for long-term success for buyers, sellers, and real estate professionals, so it’s something to look forward to in the future, even if the market looks bleak right now.
We are, undoubtedly, in a period of flux for the real estate industry. As uncertain as the current housing markets are right now, things will change in the future. As the Fed continues to ease off on its rate hikes, these turbulent waters will begin to calm and the housing market will stabilize once again. For now, it’s only a matter of time.