The crisis of affordability is here – with mortgage rates continuing to rise (see the lowest prices you can qualify for here) while house prices do. So – as part of our series where we ask prominent economists and real estate professionals about their views on the housing market now – we spoke with Nadia Evangelou. She is a senior economist and director of forecasting at the National Association of Realtors (NAR), focusing on regional and local market trends, including the effects of changing demographic and migration patterns. She also specializes in research and analysis of local affordable housing conditions and solutions to increase housing stock. Here are her thoughts on the housing market now.
The outlook is that mortgage rates will rise further
Mortgage rates for 30-year fixed loans reached about 6% in June, up from just over 3% a year ago, according to Bankrate data. The upward rise will continue, says Evangelou, just not at the same rapid pace: “I do not expect to see the same sharp increases that the market experienced in March and April. It seems that mortgage rates have already priced in some of the effects of the coming Fed interest rate increases, says Evangelou.
Some buyers may want to consider an ARM
Given today’s market, Evangelou says some buyers should consider taking out an adjustable rate mortgage instead of a fixed rate mortgage. “If they are planning to sell or refinance over the next 5 years, a 5/1 year ARM may make more sense because the rate on these is still below 4.5%. Therefore, for a median-priced home, it is The monthly mortgage payment is about $ 300 lower than the payment for a 30-year mortgage, says Evangelou.You can see the lowest mortgage rates you can qualify for here.
There are signs that the market is cooling
Both rising mortgage rates and house prices are hurting the reasonableness of many buyers. “As a result, sales of existing homes have fallen in the last four months. I expect a greater reduction in home sales activity in the following months, especially after the summer months, says Evangelou.
And buyers are priced out of the market. However, not all homebuyers can afford to buy these additional homes. According to Evangelou, buyers earning $ 75,000 can afford about 25,000 fewer listings now compared to January.
Institutional buyers can increase competition for first-time buyers
With rising mortgage rates affecting reasonableness, more people are renting, and due to low inventories, rental prices are rising sharply. “For institutional buyers, this means greater profits. However, a larger market presence of institutional buyers increases market competition for first-time buyers. Research has shown that institutional investors can take a significant share of homes that would otherwise be sold to first-time buyers and buyers with lower incomes,” says Evanagelou.
House prices will continue to rise, but at a slower pace
«Due to housing shortages, house prices will not fall in 2022. Remember that when there is a housing shortage, house prices do not fall, in fact house prices rose by approx. 15% in May, even though mortgage rates were approx. percentage points higher than the year before, says Evangelou.
The stock is increasing
There are about 20,000 more homes available for sale to buyers who earn $ 200,000. “While it is promising to see more homes available in the market, more entry-level homes are needed,” says Evangelou.