The monthly costs for some home buyers are essentially double what they would have been a year ago. Combine that with the already high prices, and this will keep a lot of people out of the market.”
But another segment that should be discussed is buyers with variable-rate mortgages. “Because there is about a four to five-month period before buyers with variable rate mortgages begin paying the prevailing market interest, we might not have seen the largest impact of the rate hikes on those mortgages until now. These buyers will struggle with contending with these punishing new payments.” And because buyers who take variable interest rate loans are already not as financially stable as those who purchase on a fixed rate, this could be very worrying.
Buyers may not find significant relief anytime soon. Mortgage rates are expected to edge lower this year but remain at about 5 or 6 percent. While demand may have dampened, the supply of homes remains low. “The housing markets vary widely across the country, with some places experiencing mild downturns and some continuing to see price hikes,” says Harris.
You will see some softening in prices for homes that have been sitting on the market for two to three months, but prices are unlikely to return to pre-pandemic levels.”
Harris believes that, in many ways, the worst is over, so to speak–even if the Federal Reserve continues with rate increases, mortgage rates will likely decrease from current levels. Yet, housing affordability is likely to remain low.