even with mortgage rates near a two-decade peak, and mismatched supply-and-demand dynamics have sent conflicting signals about what comes next.
The explanation boils down to a unique set of circumstances that have unfolded in a distorted post-COVID world. A wave of people locked themselves into ultra-low mortgage rates, creating an inventory shortage. That's kept prices from falling, even as demand gets slammed by higher mortgage rates. "A 3% difference on a mortgage is gargantuan," Channel said."You'd have to buy a house worth tens of thousands of dollars less to pay the same monthly rate. We have a convoluted market where there's not a lot of demand and people aren't actively looking to sell, but prices are still up."
"Earners of about $75,000 should be able to buy about half of all listings, but currently they can only buy about 23% of them," Evangelou said."Especially for those looking for affordable homes, homebuyers are facing a double-whammy of high rates and low supply, which means prices have to go higher."Perhaps the most surprising development in the housing market has come in the form of recent increases inand housing starts.
"I think there's been such a huge discussion about the lock-in-effect in the housing market and how homeowners don't want to get rid of their low interest rates," Wolf said. However, if they want to move and can get a builder to buy their rate down, all of a sudden that"hurdle goes away," she said. To Channel, there isn't a magic number that interest rates would have to fall to in order for demand to recover to previous levels.
Evangelou expects mortgage rates to stay above 6% through the end of the year before falling to about 5.6% in 2024. She expects home prices next year will rebound after cooling in the interim, coinciding with declining rates.