This year’s typical home buying season looks a little different as mortgage rates rise.
“If you’re expecting this spring home-buying season to look like last spring when prices were high but mortgage rates were relatively low, then you’re probably going to be disappointed,” Danielle Hale, an economist recently told The Usa. Herald. “However, if your comparison is relative to the pre-pandemic period, we are still seeing home sales above that point.”
This year’s homebuyers are paying about $375 more in their monthly mortgage payment for a median-priced home compared to last year, an increase of about 30%, Hale said.
“So that’s going to affect people’s ability to pay the same prices,” Hale said.
The average 30-year fixed mortgage rate rose to 4.67% this week, up from 4.42% a week ago, according to Freddie Mac.
“That’s typically the size of an increase that we might see over the course of several weeks,” Hale said. “And this is not the first time we’ve seen such a large increase in a one-week period.”
In fact, rates have risen three-quarters of a point in the last three weeks, the biggest three-week increase since May 1987. Since the start of the year, rates have risen 1.56 percentage points.
“Rates have already exceeded our original expectations for the year,” Hale said. “It is very likely to reach 5% before the end of the year.”
Usually this time of year, there are more houses for sale on the market. Existing home inventory rose slightly to 870,000 at the end of February, up 2.4% from January, according to a report from the National Association of Realtors (NAR).
“We’ve certainly passed that seasonal low, it’s just a question of whether or not we’re going to see growth this year,” Hale said. “Our forecast expects us to. We’ve seen some really healthy construction numbers over the last year. That will help add new options for existing homeowners looking to switch.”
Additionally, he said, some home buyers may “think twice” before making a purchase due to higher housing costs due to prices and fees, which can slow sales and allow more inventory to remain on the market. longer.
“So our expectation, our forecast for 2022 is that we expected home prices to go back into single-digit territory, roughly around 3%. I think higher mortgage rates will hasten our return to that slower price growth.”
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