The housing market has taken off this year as home prices continue to surge amid high inflation and ongoing supply chain issues, but some experts say prices could soon level out as mortgage rates rise and demand drops.
Since last year, the monthly mortgage payments have more than doubled.
With the Federal Reserve planning to reduce its holdings of Treasury and mortgage-backed securities next month, long-term interest rates have shot higher, with the 10-year Treasury note closing in on 3%.
In response to the Federal Reserve's aggressive monetary tightening, fixed mortgage rates have spiked in recent months, putting pressure on home sales.
He points out that the average monthly mortgage payment is nearly $500 more than last year, and that buying a home is difficult for most Americans.
Existing homeowners will be less inclined to make a move and take on mortgage rates of 5% or more after experiencing record-low mortgage rates during the Pandemic.
While housing prices are rising rapidly in the near-term thanks to low inventories and historically high inflation, that will change as more buyers are priced out of the market and rising mortgage rates will slow price increases over the rest of 2022, predicts Bill.
The chief market strategist for First Franklin believes that mortgage rates are close to peaking.
Home prices increased in February year over year, the third-largest reading on record, according to new data from the S&P CoreLogic Case-Shiller national home price index.
With home sales under pressure, the parabolic increase in house prices will soon peter out, and some price declines by mid- next year seem more than likely.
Several major firms recently announced layoffs due to rising rates. Last week, Wells Fargo confirmed that it had laid off an undisclosed number of home-lending employees, while Better.com announced further layoffs after a round of firings in December and March.
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