In a July report, Moody's strategists said they expect high rates to continue weighing on prospective buyers and homeowners looking to finance, as central banks appear unlikely to ease monetary policy anytime soon.
A series of interest-rate hikes from the Federal Reserve has been the main force making mortgages more expensive. A near-record surge in home prices was already hurting affordability even before the increases. Now potential homebuyers are even more stuck. "We expect central banks to maintain a tight monetary policy stance this year, before beginning to cut policy rates very gradually in 2024," according to Moody's."Housing demand in markets in which funding takes the form of floating rate or short-term lending will therefore likely remain strained as long as monetary policy stance remains tight."
The doubling of mortgage rates since the pandemic housing boom from less than 3% to over 6% has caused"notable retreats" in certain US markets, the strategists added, with western states seeing the steepest drop-offs.But even with mortgage rates hovering near two-decade highs,The going price for a typical home hit $426,056 in June, 1.5% below the all-time high, and, per Redfin. That also marked the slowest decline in home prices in five months.
"The paths toward more normalized purchase affordability could be long in some markets, or not include full reversions," the strategists said.
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