With mortgage rates on the rise and inventory high, how can you keep up with all the real estate news? Here are five trends you need to know:
Rising mortgage rates
If you’ve been considering buying a home, rising mortgage rates are real estate news that’s not likely to be pleasant to hear. While housing prices have hit record highs, experts say that they aren’t caused by a wave of speculation like what led to the Great Recession. There’s still demand for housing, and many states are facing a shortage of homes. However, rising mortgage rates will likely slow down this demand, and price out many potential homebuyers.
Rising mortgage rates are bad news for buyers and sellers alike. While economists had predicted low mortgage rates through 2022, recent events like Russia’s war in Ukraine and pandemic lockdowns in China have contributed to an increase in rates. As a result, the Mortgage Bankers Association predicts that mortgage rates will plateau around their current levels in the coming months. With this bad news, many buyers have been putting off home purchases.
Homebuyers struggle to find houses on the market
As mortgage interest rates remain near historic lows, the housing market has struggled to provide buyers with enough choices. In January, a record low number of homes were sold to first-time buyers, accounting for 27% of all existing home sales. Mortgage rates are now at 4% and are expected to rise in the coming months, further hampering the purchasing process. As a result, buyers are often left wondering, “Why now?”
The National Association of Realtors estimates that homes will spend an average of 17 days on the market by March 2022. However, rising mortgage rates are unlikely to push prices lower. The National Association of Realtors’ first-time homebuyer affordability report notes that millennials make up nearly one-third of all buyers. And while younger buyers are more likely to work with a real estate agent than older generations, they are still reluctant to purchase their first home without an agent.
Inventory is high
A large inventory in real estate markets may be a sign of caution from developers. This is because the vast inventory in most markets indicates that their earlier investments may remain stuck in the market. A solution for real estate inventory management relies on data and insights from a variety of operations, including sales agents on the ground. These agents relay information about property news to administrators. Historically, inventory has been high in many real estate markets, but that is not the case today.
While housing inventory is always a factor in determining the price of a home, the current shortage has put homebuyers on the fence. As a result, more buyers are entering the existing home market. The housing market has had trouble with supply due to a lack of new homes for sale. Meanwhile, demand has increased as the supply of homes has dwindled. In the last two years, new home construction has lagged behind and has not recovered.
expected to be another whirlwind year
The housing market has been a roller coaster for potential buyers, and the year 2022 looks to be no exception. Higher mortgage rates, rising home prices and inflation are deterring would-be buyers. The number of homes for sale has surpassed its seasonal low, but inventory remains low. Prices are outpacing supply, and homebuyer budgets are stretched. This could be a recipe for disaster.
Assuming a return to seasonality, the real estate market is expected to remain in demand through 2022. Inflation is playing a much larger role in housing markets than was anticipated six months ago, as evidenced by rapidly rising mortgage rates. Meanwhile, record home listing prices and rents are straining household budgets. Moreover, buyer demand has cooled from the early 2022 flurry.