- Housing experts see no clear end to rising mortgage rates.
- “It may take another year or two for that to happen,” says the top economist at the National Realtor Group.
- Fed Chairman Jerome Powell believes the housing market has been “substantially weakened” by higher mortgage rates.
As the Federal Reserve added another rate hike, Mortgage interest rates well above 7%housing experts are pondering what’s next in a market showing volatility.
“This process will take time. It won’t magically change everything immediately.” Beth Freedmanthe CEO of New York City real estate firm Brown Harris Stevens told USA TODAY shortly after the Fed’s rate hike.
“The mortgage market has already priced in the latest Fed move. Still, mortgage rates are near a 20-year high, hurting homebuyers.” Lawrence Yunsaid the chief economist of the National Association of Realtors in a statement. “If inflation is contained, mortgage rates will start to fall. It may be another year or two before that happens.”
Dan RichardsExecutive Vice President, Home Loans fly homesis a startup that helps eligible buyers get into homes by offering all-cash offers to sellers, agreeing with Yun that mortgage rates are likely not going down for the foreseeable future. there is
“If Chairman Powell says he won’t change plans, rates are likely to stay the same,” Richards said.
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Powell: Housing Market ‘Significantly Weakened’
Expert comments came as the Fed raised its benchmark interest rate by 75 basis points for the fourth consecutive time. As a result, “there has been a significant weakening in activity in the housing sector, largely reflecting higher mortgage rates,” Powell said. Press conference last week.
Powell emphasized the Federal Reserve’s stance that mortgage rates are actually driving home prices down in certain markets, but didn’t give specifics. but, George LatiouRealtor.com’s manager of economic research tells USA TODAY that home prices are falling in several of the top 50 market cities, including New Orleans, Pittsburgh and Birmingham, Alabama.
“This shows that demand has fallen sharply,” Latiou said. “Inventory continues to rise slightly as more homes are on the market for longer as a result.”
Annual home price growth is expected to slow to 10% by December, half of the 20% surge peak recorded in April, according to the latest data. CoreLogic Home Price Index weather.
“The housing market has been very overheated in the years since the pandemic because of increased demand and low interest rates,” Powell told reporters last week. I know the story of it going up, so many bidders did that with no conditions.
“Therefore, the housing market needs to rebalance supply and demand,” Powell concluded.
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Homebuyers are hitting a ‘financial ceiling’
Finding the delicate balance between low housing supply and high demand will continue to be a challenge for both the Fed and the housing industry.
“Whether it’s migrants or seasonally, prices have fallen in certain metropolitan areas, but there’s still strong demand and home buying interest in other markets,” Latiou added. Northeast, especially the Boston metropolitan area Among the hottest markets in the United States
Also, Ratiu and Nadia EvangelouHe is a senior economist and director of forecasts for the National Association of Realtors.
For example, according to Ratiu, a house priced at $427,000 would pay a $1,400 mortgage at a 3% interest rate and a 20% down payment at one-year interest rates. At 5%, the mortgage will be $1,800. But at 7% now, the mortgage has ballooned to about $2,300, Ratiu said.
“This does not include home insurance or HOA (Homeowners Association) fees,” said Ratiu. “Currently, buyers are reaching their financial limits when it comes to how homes are priced.”
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Mortgage rates ‘not likely to fall until 2024’
Powell’s sentiment echoed by Federal Reserve Vice Chairman Lael Brainard Fed’s latest financial stability report.
“Today’s environment of rapid and synchronous monetary policy tightening, rising inflation, and high uncertainty related to global pandemics and wars heightens the risk that shocks will lead to the amplification of vulnerabilities. For example: Liquidity strains in core financial markets and hidden leverage,” Brainard said.
The real estate market, which had already been hit by higher mortgage rates for months as a result of the Federal Reserve’s rate hike, is unlikely to ease, he said. Ruben Gonzaleschief economist at Keller Williams, a property tech real estate firm.
“As the Fed continues to battle inflation, the housing market will continue to slow as one of the most interest rate sensitive industries. Default rates remain near all-time lows. Markets are calm,” Gonzalez said. “Mortgage rates are unlikely to go down until the second half of next year, but they are likely to go down until 2024,” he said.
Andrzej SkibaPowell, head of U.S. Fixed Income at RBC Global Asset Management, has taken a “hawkish” stance that suggests the Fed thinks it’s “premature” to think about a moratorium on rates. said to have shown
“So the Fed’s cavalry may not come to the rescue in 2023,” Skiba said.
Robert DietzThe chief economist at the National Association of Home Builders expects the Federal Reserve to ease interest rates by 2024 at the latest, arguing that until then the market will be “weak” in 2023.
But Realtor.com’s Ratiu said:
Powell is hedging his bet that inflation will fall if the Fed can “raise borrowing costs to dampen the ability of consumers to spend more,” Latiu said. said the current inflation rate is 8.2%. U.S. Bureau of Labor StatisticsThe next update is scheduled for Thursday.
“If that bet proves correct, inflation will probably be more moderate, removing the pressure on higher mortgage growth rates.” Loan rates will rise from 3% in January to more than 7% in nine months, reversing this mad dash that has handicapped the housing market.”