We’ve seen the housing market start to cool off, but it finally feels as if it’s returning to Earth. Conditions for the last 2 years have been perfect for homeowners across America, but a big part of that has to do with inflation, which is once again affecting a key part of our economy. We’ve discussed the whole chain of events that has caused this, but Jerome Powell and the Federal Reserve’s decision to increase interest rates has reversed this.
Data shows that last week, mortgage applications fell to its lowest level in more than 2 decades, with high interest rates dissuading people from refinancing their loans. Additionally, existing home sales slowed to pandemic levels due to higher borrowing costs involved with loans nowadays. This mortgage issue, along with a scarcity of homes up for sale, is causing a shift in inventory of houses that economists aren’t too unhappy about as it’s reverting to the mean. According to analyst Logan Mohtashami, this will help control pricing power and keep prices in check, and the inventory argument is solid as levels have risen by 10 percent in the last 2 months. This economic trend should be promising for homeowners looking to enter the market, a group of people we’ve talked about a lot when it comes to real estate. It’s a pure fact that minorities and millennials have been disproportionately affected by the housing market in the last 2 years, and rising mortgage rates as a result of higher interest rates are a short-term pain for a long-term blessing. Unfortunately, inventory is still far behind from pre-pandemic levels, and it’ll definitely take more than a year for things to normalize if rate increases are scheduled to go the way they are.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.