The mortgage market is changing quickly.
- Rising mortgage rates could cause a drop in home buyer demand.
- Home sales and prices could decline this year as a result.
Ever since mortgage rates started plunging in 2020, buyers have been clamoring to purchase homes. But rates have climbed steadily in 2022, to the point where borrowing has become a far more expensive prospect. And that’s apt to cause a pullback in the housing market.
It would be one thing if home prices were sitting at more moderate levels, but that’s not the situation today. Rather, home prices are still extremely inflated, only now, mortgage rates are no longer low enough to help compensate for them.
As such, Lawrence Yun, chief economist for the National Association of Realtors (NAR), now expects a decline in home sales this year to the tune of 6% to 8%. Initially, the NAR’s projection was for home sales to drop 3% in 2022. But based on the way mortgage rates have been jumping, it’s not surprising to see a more drastic number.
If you’re looking to sell your home this year, you may want to put that listing together sooner rather than later. If mortgage rates keep climbing and buyers start to pull out of the market, you could end up getting a lot less money for your home than what you’d command now.
Don’t miss the chance to sell at a premium
Today’s residential real estate market continues to favor sellers in a big way. That’s because housing inventory is still at a low, and that lack of competition gives sellers the option to command higher prices for their homes.
As of January, home prices were up 19% on a national level, according to CoreLogic. But that number may not hold steady. If mortgage rates keep rising, buyers looking to get a mortgage might reach the point where they have to drop out of the market due to not being able to afford a home. That could hurt sellers who wait too long to list.
To be clear, mortgage rates may not rise as quickly as they’ve climbed during the first three months of 2022. But it’s fair to assume they will continue to go up. That’s because the Federal Reserve has plans to implement several rate hikes this year. And while the Fed doesn’t set consumer borrowing rates, its actions can influence them heavily.