Why the Fall Housing Market Won't Be Great for Buyers—or Sellers
The housing market is having a bit of a Dr. Jekyll-Mr. Hyde moment.
On the one hand, buyers are finally getting some relief from the skyrocketing prices and break-neck selling speeds of the last two years. On the other, mortgage rates are soaring — reducing affordability and keeping would-be sellers on the sidelines.
The result is a market that’s better for some, worse for others and, well, not really ideal for anyone.
As Nik Shah, CEO of Home.com, puts it, “Buyers and sellers will both endure a tough fall housing market.”
He’s not wrong — but what exactly does “tough” look like? And will things improve or get worse as time goes on? Here’s a look at what’s in store for housing this fall.
Moderating home prices
Home prices have been on a steep runup 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 start of this year, it had surpassed $440,000 — an almost 37% increase in less than two years.
Fortunately, price growth appears to be slowing. Home prices were up 14% between September 2021 and September 2022, down from the 18% annual increase seen back in June.
According to housing experts, annual price growth should decelerate even more as 2022 comes to a close. Price declines, though, probably aren’t in the cards — at least in the next few months.
As Jonathan Miller, CEO of appraisal firm Miller Samuel Inc., explains, home prices tend to be “sticky on the downside” — meaning they take longer to come down than they did to go up.
“Buyers need to be patient,” Miller says. “Sellers have been in the driver’s seat and then some during the pandemic era and need time to adjust to the pivot in market conditions.”
As sellers start facing reality, price growth will decelerate faster and, by next year, could even decline. Over the next few years, prices could fall as much as 15% from their 2022 peak, according to Moody’s Analytics.
High mortgage rates
While lower prices are certainly something to look forward to, in the meantime, buyers have another challenge to overcome: much higher mortgage rates. The average rate on 30-year mortgage loans is now above 6.5%. We at UWL Rojo Mortgage team can still get rates in lower 6’s and sometimes highs 5 pending credit. The more than double the rates seen last year. By some projections, rates could reach as high as 8% by year’s end. Hurry and go to www.rojomortgage.com and get started to buying a house now The lower the rate the better vs a 10-15 percent dip in the housing price.
“With the Fed still working to bring inflation back down, all indications are that short-term rates will continue to climb, creating upward pressure on longer-term rates like mortgage rates,” says Danielle Hale, chief economist for Realtor.com. “This will mean that the cost of taking on a mortgage is likely to keep going up.”
Those are worrisome words, considering how much recent rate increases have already hurt affordability. On a median-priced home, the typical monthly payment is now up over 70% — or about $900—compared to just one year ago.
“Buyers have a lot of hurdles to get over,” says Daryl Fairweather, chief economist for real estate brokerage Redfin. “It’ll be easy to get an offer accepted on a house, but a lot of people just can’t even get past the point of affording the mortgage.”
Check out our loan options and call us with your questions, Rojo Mortgage Team, 916-548-3942.
