It’s the old supply-and-demand predicament: Home sales in the U.S. continue at a torrid pace, but the availability of listings remains limited. Buoyed by historically low mortgage rates, buyers keep shopping for homes, reducing the available inventory and sparking a rise in home prices across the country.
News website The Atlantic summarized the sizzling home market this way:
“Pick a housing statistic at random, and it’s probably setting an all-time record. Home prices: record high. Inventory: record low. Percentage of homes selling above asking price: record high. Average time on market: record low.”¹
Meanwhile, homebuilders are contending with an increase in material costs and a shortage of labor. These issues come amid an ongoing shortage of housing. A study commissioned by the National Association of Realtors found the U.S. is coping with a deficit of about 2 million single-family homes and about 3.5 million other housing units.²
So what can we expect from U.S. real estate? Here are five factors that illustrate where the housing market is today and is likely heading tomorrow.
ROCK-BOTTOM MORTGAGE RATES TO GRADUALLY RISE
Low interest rates continue to fuel demand from homebuyers. Some experts believe mortgage rates will creep up later this year, but they expect rates to remain near historic lows.3 However, the Federal Reserve signaled in mid-June that it may institute two interest rate hikes as soon as 2023, which could then trigger a more substantial uptick in mortgage rates.4
In June, the Mortgage Bankers Association reported that 2020 closed with the average rate for a 30-year, fixed-rate mortgage sitting at 2.8%. But the association anticipates the average rate climbing to 3.5% at the end of 2021 and 4.2% by the end of 2022.5
“As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” said Sam Khater, chief economist at Freddie Mac.6
What does it mean for you?
You’ve likely heard the old saying about “striking while the iron is hot.” Well, that phrase applies to the current environment for mortgage rates. It’s impossible to predict with certainty when mortgage rates will rise or fall. So, when mortgage rates are at or near historic lows (as they are today), you should seriously consider taking advantage of those rates to borrow money for a home purchase or to refinance your existing mortgage.
HOME PRICES EXPECTED TO KEEP CLIMBING
Low mortgage rates are sparking interest among homebuyers, but some are... for the full article click here