I’m the chief economist for a $ 5 billion real estate data and title company. Here are 5 things you need to know about the housing market now

Homes have become increasingly unaffordable for millions of Americans – with house prices and mortgage rates continuing to rise (see the lowest rates you can qualify for now here). 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 Mark Fleming. Fleming – the chief economist for title, settlement, real estate data and the risk solution company First American Financial Corporation – has analyzed and forecast the real estate and mortgage markets for 20 years. Prior to becoming chief economist at First American, Fleming developed insights and analytical products for CoreLogic as well as valuation models from Fannie Mae, and today his research expertise includes real estate and urban economics and mortgage risk. So we asked Fleming: What do today’s buyers and sellers need to know about the housing market?

Mortgage rates are higher, but they are still not high

Although they are significantly higher than three months ago, which reduces the purchasing power of housing, they are around 6% for a 30-year fixed-rate loan, which Fleming says is far from high. “Mortgage rates are higher, but by historical standards they are not high,” says Fleming. He has a point: This chart from the St. Louis Fed shows the curve for mortgage rates since 1975. (See the lowest rates you can qualify for here.)

Affordability is increasingly a challenge for buyers

House prices have been rapid over the past two years. In fact, according to data from the National Association of Realtors, the median sales price for an existing home was up 17% from last year. “This is important because it has been virtually impossible for homebuyers to keep up, and as a result, affordability has declined,” says Fleming.

Fleming says that the rise in house prices, measured by many of the house price indices reported in the media, has a significant lag, sometimes as much as six months. – It will take a few more months before the house price indices reflect how prices have reacted to the rapid rise in mortgage rates in the second quarter, says Fleming.

Prepare for lower house price growth

But just because affordable is a challenge, does not mean that house prices will fall. Fleming says that his research shows that in epochs with rising mortgage rates, as we are experiencing now, the number of home sales tends to fall, but house prices usually do not. “Fewer sales and less price increases are the expectation,” says Fleming.

The housing market is cooling down

See inventory levels and the amount of vendor price reductions on listings. “These are the leading indicators of where prices will go and how the rise in mortgage rates has affected demand. More inventories and more reductions in seller prices signal a cooling market,” says Fleming. “Only days on the market were never normal. In fact, the old saying used to be that sellers should usually expect their home to take up to 3 months on the market to sell. Of course we are a bit away from that yet, but sellers should expect it takes longer to sell their home. For buyers, expect less fierce competition to buy a home, says Fleming. (See the lowest prices you can qualify for here.)

Rate an ARM and be a smart shopper

Given today’s market, Fleming says that it is easy to lose focus in the midst of changes in mortgage rates and other housing dynamics. The reality is that some basic steps are still important and are not much different than any market. Look for the best mortgage, and research adjustable rate mortgages in a market with rising interest rates for the lower interest rate advantage. Make your choices based on the home as a shelter , rather than an opportunity for return on investment and patience, says Fleming.