Source: The Hill —
Amid a housing market plagued by high mortgage rates, inflation woes and recession fears, housing prices in the U.S. are expected to fall next year, though the market isn’t likely to see a jump in buyers as a result.
Forecasters indicate 2023 could see a continued slowdown in housing sales even as home prices drop due to issues with overall affordability.
A big hurdle for new home buyers will be the higher mortgage rates.
Thirty-year fixed mortgage rates went up from about 3 percent to around 7 percent this year, according to economists, as the Federal Reserve upped interest rates in a bid to slow inflation.
While that has contributed to falling home prices, it has also made it tougher for people to buy homes — especially as families also deal with rising costs for food, gas and other necessities.
“That’s a lot more money you have to pay out every month, between a 3 percent interest rate and a 7 percent interest rate. It’s a significant chunk of change you have to pay out, even when the housing prices go down,” said Dennis Shea, the executive director of the J. Ronald Terwilliger Center for Housing Policy at the Bipartisan Policy Center.
Though mortgage rates are up over the last year, they have been falling in recent weeks, and the Mortgage Bankers Association predicts 30-year mortgage rates will drop to around 5.2 percent by the end of 2023. Other forecasters like Redfin and Realtor.com are also predicting that mortgage rates will likely fall slightly.
Fed Chairman Jerome Powell has also indicated that the central bank will scale back on its interest rate increases, which could help settle the market.
Still, for many people trying to buy a home, the mortgage payment will be daunting.
“Right now, you see home prices declining … so you’ll probably continue to see that going forward. But affordability is still a major, major problem,” said Shea. “Wages have not kept pace with the housing market. Over the past year, you see mortgage rates have gone up dramatically, and that has priced many buyers out of the market.”