It appears the COVID-19-related surge in the housing market is nearing its end. The cost of homes has reached it’s tipping point, and less people are able to afford a home. In contrast to previous times when this issue arose, Americans won’t be able to count on low mortgage rates to correct the market.
According to First American Financial Corp.’s Real House Price Index, “affordability” decreased by 16.6% between August 2020 and August 2021 (this metric accounts for household income, mortgage rates, and nominal home prices). In August 2021, “nominal home prices” were 20.7% higher than they were in August 2020; this overrode the 3.5% increase in “buying power” resulting from increased income and lower mortgage rates. While all of this may be concerning, it is worth noting that these numbers are still 37.5% lower than they were in 2006 before the Great Recession.
Many experts believe that the mortgage rate will continue to climb, particularly as the Federal Reserve ceases their purchasing of mortgage-backed securities in an effort to stimulate the economy in the wake of the pandemic (some experts like Fannie Mae believe rates will reach 3.4% by the end of 2022, while The Mortgage Bankers Association believes they will hit 4% by the end of 2022, and 4.3% by 2024). The numbers aren’t all doom and gloom, however, as many experts believe the same factors causing mortgage rates to increase will also cause wage growth.
At the Chernov Team we understand that knowledge is power, and knowledge of how mortgage rates and other variables will impact the housing market as a whole is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.
