The housing market is also in a strange place. Fears of a coming recession are on the rise because of rising interest rates. Prospective buyers may be wondering what it means to own a home. Mortgage rates have begun to edge lower after spiking earlier this year, and price growth will likely slow down as demand falls. The US housing market will not see a new era of affordability because of a persistent lack of available homes for sale. There are plenty of jobs to go around, wages are rising, and spending is booming, but some Americans are having a hard time. Consumer sentiment has fallen to a decade low while inflation is at a forty-year high. All forms of borrowing from car loans to mortgage payments have become more expensive because of rising interest rates. Fear of a possible recession is spreading as the economy falls further out of whack. Experts believe it will not happen in 2022, but there are signs that it will happen in 2023.
A recession could hit in 2023 — but it will likely be mild
Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a statement that financial conditions have tightened significantly and the economy is slowing faster than previously expected.
If a recession is on the horizon, it could mean the housing market is bracing for a cool down after years of hot demand driving prices higher, but that doesn't mean homeownership will become more affordable for prospective buyers.
The chief economist at Freddie Mac told Insider that if the economy were to weaken, that would further weaken demand.
Home prices are still rising in other parts of the country at a slower rate than in some markets. While price growth is expected to slow further, Kiefer says that doesn't mean prices will go down.
We expect house price growth to moderate over the summer. That means that coupled with higher mortgage rates will make it harder to buy a home.
Theemic-era mortgage deals are over and they are making homeownership more costly.
In May, mortgage rates fell slightly, but they are still higher than they were a year ago.
The average 30-year mortgage rate fell to 5.10% last week, from a high of 5.30% in December 2020, but that is still higher than the low of 2.68% in December 2020.
As mortgage rates put additional pressure on housing costs, buyers of a median-priced home are looking at monthly mortgage payments that are more than a year ago.
With rates generally on the rise and inflation putting pressure on everyday costs, Americans are likely to have a harder time buying a home.
Duncan said that the worsening affordability of homes is a problem for potential entry-level homebuyers, but current homeowners are less likely to trade in their existing lower-rate mortgages and list their homes for sale, both of which will likely weigh on sales.
To boost housing market equilibrium, home prices will need to fall and that means more homes will need to be built.
The number of homes for sale are still at historic lows even with more new listings hitting the market.
To address home price growth and the nation's lack of housing affordability, the Biden Administration has launched an initiative that proposes using federal dollars to boost the affordable housing supply. The plan will take course over the next five years.
Americans are unlikely to see a surplus of new inventory in the real estate market next year. With a possible recession looming and mortgage rates near a thirteen-year high, the nation's lack of housing inventory will continue to make it hard for buyers to find a home in the future.
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