With the combination of rates being at the highest levels for years and prices up, and the Media putting a negative spin on EVERYTHING… Can we blame them? Probably not… but we certainly can educate them.
First up: Prices are not likely to go down. Take a look at this chart:
For the past 40years we have averaged 2-2.5 million units listed for sale in the country. We have been struggling with less than half that average for a few years. What you can’t see on this chart is; of that current inventory number, over 30% is under contract so the available number is more like 700,000 homes. In 2007 as the bubble popped, we had nearly quadruple the inventory with about 36,000,000 less people in the country. Prices have gone up because of basic supply and demand.
In the past 63 years housing appreciation has averaged 4.34%/year. So, in a normal market that $400,000 home will likely be $418,000 next year. Even with higher interest rates today, modest appreciation will negate the higher payment. If the forecasts are correct we should also see rates in the 5’s or 6’s in the very near future as prices continue to climb… the downside to lower rates will be increased competition in the market as more buyers are able to qualify with lower rates.
I really do not think we will see 3s or even 4s again for Mortgage rates. but 5s and 6’s are very likely.