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The housing market was more than frozen. This is why experts say home affordability won’t get any better any time soon.


US housing market

Brandon Bell’s photo/Getty Images

  • Experts told Insider that the housing market is frozen and affordability is unlikely to improve anytime soon.

  • Activity has slowed thanks to high mortgage rates, which have pushed both buyers and sellers out of the market.

  • But interest rates are likely to stay high as the Fed keeps an eye on inflation.

Real estate experts say the housing market is frozen by high mortgage rates and home prices – and while affordability will improve somewhat, it is unlikely to improve significantly anytime soon. tell.

Bankrate mortgage analyst Jeff Ostrowski told Insider that while mortgage rates and home prices have fallen slightly in recent months, they are unlikely to drop significantly over the next two to three years. That speaks volumes for younger children home buyers have been locked out of the market.

That’s largely because the Federal Reserve is expected to keep interest rates high next year, which will weigh on mortgage rates continuing to rise.

Meanwhile, high mortgage rates will deter existing owners from listing their homes, as many financed their home purchase years ago when interest rates were historically low and for sale. can now mean financing a new purchase at a higher interest rate. This is possible keep inventories low and house prices high.

“Nobody really expected mortgage rates to drop that much,” said Ostrowski, forecasting rates to stay in the 5%-6% range next year. “It’s a tough market where there will be more buyers than sellers in the near future. And in that case, it’s hard to see prices actually fall.”

Redfin’s deputy chief economist, Taylor Marr, corroborated the sluggish housing market, predicting mortgage rates will only drop slightly to around 6% by the end of the year. Meanwhile, home prices have largely bottomed out, he estimates, with only a slight drop left before bottoming in June.

“It doesn’t seem like prices have really changed much and interest rates haven’t changed much either,” Marr told Insider. “We described it like a musical chair game, where most of the participants just sat in their seats and once people started to leave their seats, that would be the place to be. affordable housing association.”

Housing in limbo

These are precarious times for the US housing market, with activity slowing significantly in recent months as the Fed raised rates aggressively. As rates on 30-year mortgages – the most popular home loan in the US – near 20-year highs while prices stuck at highs, affordability has taken a hit for many buyers. potential.

Although some pundits sounded the alarm last year about a dramatic drop in home prices, low inventory levels kept them going.

The result has left the market in limbo, with both homebuyers and sellers do not want to enter the market unless mortgage rates drop.

“A year ago, it was extremely expensive,” says Marr. And maybe it’s a little less expensive now.

Although some pockets of the housing market have seen a enough sense to reduce house prices in order to recover sales, affordability problems are currently holding back 73% of potential home buyers in the USBankrate said in a recent report.

Mortgage rates – and likewise, home buying ability – will hinge on future Fed rate moves and any subsequent swings in the interest rate market. Fed Chair Powell suggested rate will be at all year high as the central bank monitors inflation, while the market is eyeing the high possibility that the central bank may rate cut right after July meeting.

Read the original post on Business Insider

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