High mortgage rates continue to cause chaos in the housing market, and experts warn more is ahead. Right now, rates are hovering near seven percent. National Association of Realtor data shows the average price of existing homes nationwide is $410,000. The data also shows new homes are selling for roughly the same price. Ten years ago, the cost to build new was nearly $60,000 more than buying an existing home. Experts attribute this to lingering, high rates.
Experts also say buyers who locked in pre-pandemic rates are afraid to sell and re-enter the market. This decreased inventory is driving the costs of homes up right now. According to The Hill, bidding wars are common especially on the lower end of the market. In fact, experts cite bidding wars as a big deterrent for selling in the current market.
that’s still going to be a problem going into the rest of the year simply because of what we’re calling this mortgage winter.”
Yelena Malayev – Economist, KPMG
Moreover, recent credit agency surveys found nearly 79% of people under the age of 40 are waiting to sell. High rates and low inventory are just a few factors fueling the ongoing chaos in the housing market.
Interest Rates Impact on Mortgage Rates
The Federal Reserve is still working to lower inflation across America. Inflation remains above the bank’s preferred rate of two percent. In order to get to the target rate, The Reserve has hinted at more rate hikes. These hikes aimed to lower inflation, and after ten straight increases the number is trending in the right direction. Still, the bank hints at two rates hikes in the possible future.
Mortgage Rates and Interest Rates are tied together, so as long as one is high the other rate will reflect that. After a brief pause, The Federal Reserve plans to raise interest rates by a quarter point between 5.25 to 5.5 percent. This would be the highest rate seen in America since 2001.
The projected quarter-percen