Will Home Prices Drop? Will Mortgage Rates Rise?

Buying a home has never been easy. However, over the past few years, the process has become truly herculean as buyers have been pushed to emotional and financial limits. Sellers, on the other hand, largely have been able to sit back and enjoy the ride, which has typically culminated in a massive payday.

The housing market has shifted dramatically over the past few months. Higher mortgage rates have thinned the pool of buyers, begun to rein in runaway home prices, and forced many sellers back to the negotiating table. The changes are leading buyers and sellers to wonder who has the upper hand these days.

So as real estate continues to cool along with the weather, what do we know about this year’s much anticipated fall housing market.

“The housing market is going to continue to be in an adjustment period as buyers and sellers try to figure out what’s ahead,” says Realtor.com® Chief Economist Danielle Hale. “The economy is at a turning point, and that’s going to result in uncertainty among buyers and sellers. People are more worried about a recession than they have been.”

She anticipates buyers will have more opportunities and less competition this fall to purchase homes. There will be more homes for sale as many properties sit on the market longer. Buyers won’t have to submit offers within hours of touring a home, and they will be able to insist on inspections and other common-sense contingencies. In many markets, they won’t even have to offer more than the asking price—and may even be able to negotiate a lower price.

However, home prices and mortgage rates—the latter of which has more than doubled in the past year—are expected to keep rising, leaving buyers this fall saddled with significantly higher monthly payments than they would have had earlier this year. And buyers shouldn’t expect a large influx of homes to hit the market to provide any relief.

Mortgage rates will likely continue to rise

The fate of the housing market this fall, and what ultimately happens with prices, will largely depend on mortgage rates. They are now the highest they’ve been since 2008 and more than double what they were just a year ago, according to Freddie Mac. Rates hit an average of 6.02% for 30-year fixed-rate loans in the week ending Sept. 15—up from 2.86% a year earlier, according to Freddie Mac.

Mortgage rates are likely to keep rising as the U.S. Federal Reserve continues hiking its own rates to fight inflation. Mortgage rates generally follow a similar trajectory.

Each additional percentage point can make monthly mortgage payments significantly more expensive and add tens of thousands of dollars over the life of a 30-year loan. Today’s buyers are paying about two-thirds more each month for the same house than they would have a year ago, thanks to a punishing combination of higher rates and prices.

The good news for buyers is rates vary tremendously based on the loan and the lender as loan officers compete for business. That presents opportunities for savings.

Give us a call and let's discuss your options to determine if now is the time for you to make a move!

615-796-6081

www.SouthernTraditionRealty.com