“Purchase demand continues to tumble as the cumulative impact of higher rates, elevated home prices, increased recession risk, and declining consumer confidence takes a toll on homebuyers,” said Sam Khater, Freddie Mac’s Chief Economist. “It’s clear that over the past two years, the combination of the pandemic, record low mortgage rates, and the opportunity to work remotely spurred greater demand. Now, as the market adjusts to a higher rate environment, we are seeing a period of deflated sales activity until the market normalizes.”
Normalization. Yes, we should begin to see normalization in the coming months as far as home price gains are concerned. The latest reading from the S&P Case-Shiller Home Price Index saw a gain of 20% year over year. That kind of frothiness has been around for the past couple of years, but it isn’t sustainable. A more normal rate of increase can be seen historically at around 3.5% to the high end of 5% annually.
Freddie Mac is forecasting that home prices will rise on average 12.8% this year and fall up to 4% in 2023. CoreLogic sees growth at a 5% pace from May 2022 to May 2023 in its latest report.
The National Association of REALTORS recently stated that there are more homes on the market and those that are priced to sell have been moving quickly while those that are priced too high are discouraging prospective buyers.
Bottom line: There will always be an appetite to live the American dream of homeownership. A place to hang your hat and call your own. As we share in our next article, it is never a bad time to purchase real estate.
Source: Mortgage Market Guide
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