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Homebuying has been nothing short of a frenzy over the past two years, for a multitude of reasons. If you’ve been thinking of buying a home but haven’t yet pulled the trigger, you’re now facing a conundrum as both home prices and interest rates have spiked higher. This combination of forces has made homes unaffordable for many would-be purchasers, especially first-timers. The obvious question buyers face now is whether it’s too late to jump into the housing market or if things will only get more out of control over the coming year? Here’s some information to help you make that choice.
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What Are Current Mortgage Trends?
In early 2021, 30-year mortgage rates bottomed out at about 2.65%, depending on the lender. Since then, rates have trended higher, accelerating in early 2022. In mid-March alone, rates spiked up to 4.72%. Interest rates have risen in response to a number of factors, including uncertainty over the war in Ukraine, sharply rising inflation and the Federal Reserve promising to raise rates aggressively in 2022.
How Have Home Prices Performed?
Home prices have risen dramatically over the past two years, and indeed have been rising over the past decade, with the median sales price in February 2022 doubling that of February 2012. In February 2022 alone, prices rose 15% on a year-over-year basis, just the latest in a string of significant year-over-year price jumps. Prices have been moderating somewhat, but the gains remain impressive.
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What Do Rising Rates Traditionally Mean for Home Prices?
Traditionally, rising mortgage rates slow both the rate of home purchases and the rise in prices. Thus far in 2022, rising rates have moderated sales numbers but they have yet to curtail rising home values. If rates continue to rocket higher, it can eventually be expected to have an effect on home prices. But no one knows exactly when that equilibrium point will be breached, even the experts.
Trends That May Shift Historical Patterns
The year 2022 has seen a wild crosswind of an overheating economy, geopolitical upheaval, and various demographic and socioeconomic factors affecting the housing market. Here are just a few that may alter the historic trends when it comes to home buying patterns.
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