Supply, Demand, & the Future of Home Prices
The real estate market is in a bit of a flux. There was sky-high demand from home buyers because of record-low mortgage rates, but demand is projected to soften. Typically, when demand falls for any good or service, you would expect a price drop. This housing market is unique from other markets due to the record-low inventory. So, as mortgage rates rise and demand cools off, the big question will be if that can offset how few homes are available to home buyers. Are today’s rising home prices being driven more by home buyer demand or low inventory? The team at Peoples Choice Mortgage is here to look at today’s trends and see what home buyers and homeowners can expect from home prices.
Will Mortgage Rates Continue to Rise?
Mortgage rates will rise as we head into the middle of this year. The economy has been going through many changes as the coronavirus has started to lighten. The rising has already happened as we are currently in an 18-month high of mortgage rate increases. Mortgage rates have been continuously increasing. These increases are expected to happen. Experts have predicted that inflation would be one of the biggest factors influencing rising mortgage rates. Fears of inflation mean interest rates will increase several more times.
2021 was when mortgage rates were slowly increasing but still hovering at historic lows. Mortgage rates were also lower because investors were worried about the pandemic and its effect on the housing market. These worries made sense because the future of living was uncertain. Jobs are now switching back to in-person, and people have to commute to more places. This has caused confidence in the market, which has led investors to invest more. The result is higher mortgage rates that do not seem to be going down soon.
Will Home Prices Decrease?
Inflation has been one of the biggest causes of higher home prices. The Bureau of Labor Statistics reported that the Consumer Price Index (a tool to measure inflation) rose by 0.8% in February. This is the highest it has been in 40 years. To make matters worse, that number rose to 1.2% in March. Inflation means that the general price of most goods and services, including the housing market, will go up. More people want to buy houses than there are actual houses available. This has negative consequences for the future, as we can expect housing prices to rise.
As was expected, home prices have continued to rise up to this point in 2022. This March, the prices soared to a new height of $375,300. The numbers we are seeing for home prices are in all-time high territories, which makes you wonder how long this can last. This has also had an effect on the number of home sales going on in the United States. As March was one of the highest records of the year for home prices, it was also one of the lowest for home sales. Homebuyers are not too eager to purchase homes that they know are going to be overly expensive. However, even if the number of eager home buyers dwindle, that is not a guarantee that home prices will decrease. Again, if inventory is so low, then it might be even too low for what limited demand remains, regardless of how high home prices go.
Final Thoughts
There are so many factors causing prices to rise in the market. Inflation has led to an increase in mortgage rates in the real estate market. The changing economy and the lack of supply has to lead to houses being more expensive. Mortgage rates have also made a bit of a climb, although still historically low. If you are thinking of buying a home or refinancing your current mortgage, it is best to act now. Delaying your decision can cost you the opportunity to get lower monthly payments and big savings over the life of your home loan. If you want to buy a house, do it as soon as possible to lock in the best possible mortgage rates. Inflation could raise the value of your home so that it is worth more in the future, so you only do a disservice to yourself by waiting.
The best thing you can do is contact us and try one of our complimentary mortgage qualifiers. This will tell you exactly how close you are to buying a home of your own. However, if you do not qualify for a mortgage today, there is no need to fret. At Peoples Choice Mortgage we believe that everyone deserves the right to own a home. Just because you do not qualify today, it does not mean that you cannot qualify in the future. We are here to help. Delaying your decision to buy a home could mean a higher rate and a higher price. Contact us today!
