Autumn housing market prospects | money

The housing market has a little Jekyll-Mr. Hyde moment.

On the other hand, buyers are finally getting some relief from the very high prices and super selling speeds over the past couple of years. On the other hand, Mortgage rates Rise – reduce affordability and keep potential sellers on margin.

The result is a better market for some, worse for others, and it’s not really ideal for anyone.

As Nick Shah, CEO of, said, “Both buyers and sellers will bear a hard landing in the housing market.”

He’s not wrong – but what exactly does the word “difficult” sound like? Will things get better or worse with time? Here’s a look at what housing has in store this fall.

Housing price adjustments

Home prices have risen sharply since the early months of the pandemic. The median home price in the second quarter of 2020 was just $322,000, according to the U.S. Census Bureau. By the beginning of this year, it had topped $440,000 — an increase of nearly 37% in less than two years.

Fortunately, price growth appears to be slowing. Home prices rose 14% between September 2021 and September 2022, down from the 18% annual increase in June.

according to housing expertsAnnual price growth should slow further as 2022 comes to a close. However, a price drop likely won’t be in the cards – at least for the next few months.

As Jonathan Miller, CEO of valuation firm Miller Samuel Inc., explains: house prices tend to be “constant on the downside” – which means they take longer to fall than they did to rise.

“Buyers have to be patient,” Miller says. “Vendors have been in the driver’s seat and then some during the pandemic era and need time to adapt to the axle in market conditions.”

As sellers begin to face reality, price growth will slow even faster, and may even drop by next year. Over the next few years, prices could drop by up to 15% from their peak in 2022, According to Moody’s.

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Mortgage rates rise

While lower rates are certainly something to look forward to, in the meantime, buyers face another challenge to overcome: rising mortgage rates. The average 30-year mortgage rate is now above 6.5% — more than double the rates we saw last year. According to some forecasts, rates could reach 8% by the end of the year.

“With the Fed continuing to lower inflation, all indications are that short-term interest rates will continue to rise, creating upward pressure on long-term rates such as mortgage rates,” says Danielle Hill, chief economist at . “This means that the cost of obtaining a mortgage is likely to continue to rise.”

Those are worrying words, given how much recent interest rate increases have already hurt affordability. In a median-priced home, the typical monthly amount is now more than 70% – or about $900 – compared to what it was just a year ago.

“Buyers have a lot of hurdles to overcome,” says Daryl Fairweather, chief economist at real estate brokerage Redfin. “It would be easy to get an acceptable offer on a home, but many people can’t even get past the point of affording a mortgage.”

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The housing market is slower

Higher costs drive some buyers out of the market, paving the way for a much slower (and less competitive) decline.

Just look at recent home sales for proof. In August, the number of homes sold decreased by 20% compared to the previous year. And last month, real estate stayed on the market for an entire week longer than last September.

“The craziness is disappearing,” said Jean-Louis, a HomeLight agent in St. Louis. “The homes have been on the market for more than a few days now. Buyers are not competing with many other offers, and we are seeing some price cuts.”

Bidding wars also fell by the wayside. According to Redfin, four out of 10 buyers experienced a bid war in August — the smallest share since early 2020.

It gives buyers some much-needed breathing room – whether while searching for a home or at the negotiating table.

“Buyers can expect to have more time to consider a purchase without necessarily going out of hand,” says Christian Deritis, deputy chief economist at Moody’s Analytics.

That was unheard of a few months ago, when waiting over a day or two was basically a kiss of death.

It’s also a trend that will likely continue, especially if mortgage rates continue to rise. According to a survey by Zillow and The Harris Poll, if rates reach 7%, more than two-thirds of potential homebuyers say they will stop their search. If this happens, competition will decline further, giving buyers more power – and even more time searching for their homes.

As Paul Reddam, a Compass agent in Austin, Texas, explains, “regardless of the pressure of higher interest rates” — and that’s a big “side” — “buyers can expect a near-perfect market, with more homes to choose from, less competition, and more Time to consider their options and be able to negotiate a price.”

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More homes for sale (but still not enough)

The housing market has long been plagued by a lack of supply. Although this shortage has not been completely resolved, the sluggish market has allowed inventory to build up, giving buyers more choices when shopping for a home.

Total active home inventory increased by 27% compared to last September. On any given day last month, about 155,000 homes were offered for sale across the country.

“There are roughly five homes for every four they’ve seen for sale at this time last year,” Hill says.

Although this is a “remarkable improvement,” she says, it is an indication of lower demand rather than increased supply. In fact, new listings – the number of homes just put on the market – fell 14% in September.

If prices continue on track above 6%, the inventory will only tighten.

“Higher mortgage rates will worsen housing affordability and negatively impact homebuyer demand,” Shah says. “However, higher mortgage rates may have a greater impact on home sellers.”

High mortgage rates discourage many sellers from listing—especially those with one of the record low interest rates offered in early 2021. Currently, about 85% of mortgage holders enjoy an interest rate below 5% and about a quarter have rates below 3%. For these homeowners, selling could mean buying again at a much higher price — and paying.

“We’re seeing an expansion of inventories, but it’s still extraordinarily low,” Miller says. “Sellers remain uncertain about the future of the market and are strongly associated with the record low rates they enjoyed in the pandemic era refinance or buyout period.”

Looking ahead: a period of “inactivity”

What can result is a total slowdown on both sides of the equation.

Homeowners, at least those not forced to sell due to job changes or other necessities, will be locked in their existing homes, leaving time for prices to fall. At the same time, buyers will continue to get lower prices, unable to afford the higher payments that come with higher prices.

According to Grant Cardone, CEO of Cardone Enterprises and longtime real estate investor, if Federal Reserve Raises its reference price in the next two meetings As I explained, such a scenario can be implemented.

“It will send housing into the biggest cycle of inactivity we have seen in 20 years,” he says.

Only time will tell, but one thing is certain: The housing market changes, and what the Fed does over the next few months — and where it sends mortgage rates — will determine much of its path forward.