A good housing market is good for the economy, except for when it’s bubbly. The housing market has been performing amazingly well, something we haven’t seen since the mid-2000s. That housing market ended in a bubble, which burst, but this one has been a lot more natural and healthier. Homeowners had a great 2021, but things could be different this year with rates being more involved now.
Here, we aren’t only talking about interest rates, but mortgage rates too. In December, mortgage rates rose to the highest level since May of 2020, with the average rate for a 30-year fixed-rate loan sitting at 3.22 percent, which is a 0.11 increase from last month. With low interest rates, buyers were able to borrow more money to purchase homes, which is shown in the 13.9 percent increase in existing home prices to $353,900. With interest rates on a possible rise, mortgage rates are set to follow, according to analyst Ivy Zelman. Zelman also said that homeowners are locking in mortgage rates below 4 percent as anything higher would be a killer, and this is expected to sustain according to data from the NAR. Unfortunately, this prevents more homeowners from refinancing their homes as they won’t want to restructure their contract with higher rates, but economists expect this to affect non-bank lenders as banks have stepped away from mortgages after 2008. Overall, the rise in mortgage rates will lead to a slight slowdown in the housing market, but it’s still expected to grow, which could continue to benefit homeowners across the country. What’s your take on the housing market currently?
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.