Mortgage Rates Expected to Rise Late 2022 – Early 2023
Home sales in the U.S. are hitting peaks not seen since before the housing bubble burst in 2008. However, the current housing boom is very different than any we’ve seen before, where most analysts determined that there may not be a bubble to burst, although prices may drop slightly by the end of 2022 or early 2023.
Some economists believe that mortgage rates may rise a full percentage point by the end of 2022. Others argue the increase won’t happen until well after that point. Whatever the case, when mortgage rates rise, the housing boom will likely return to pre-pandemic numbers.
Low Mortgage Rates Bring More Buyers Into the Market
During the pandemic, mortgage rates dropped to 3%, reducing monthly payments by 12%. This has allowed more people to buy a home. Young people who would have normally waited are buying now, driving demand and home prices up. In addition to low mortgage rates, remote work is causing buyers to shift from apartment living to single family homes in suburban areas.
The U.S. is currently experiencing a housing shortage. Freddie Mac estimates that 2.5 million homes would need to come on the market to combat the current shortage. Low supply caused home builders to increase production at the end of 2020. Unfortunately, high material costs have made construction difficult. Building permits and new builds are down 30-40% since the mid-2000s.
Despite what some economists say, the current boom is definitely not a housing bubble. Current home prices can be explained by low supply and low mortgage rates. Unlike the housing bubble of the mid-2000s, we’re seeing more credit-worthy borrowers hitting the market. Bank requirements are much stricter than they’ve been in previous years. In order to secure a loan, homebuyers need a high credit score and a sizeable down payment.
Buyers Need to Act Fast to Take Advantage of Low Rates
The current market has led to frantic buying across much of the country. Record-low mortgage rates, remote work, and a shift in housing type demand are driving the boom. As homebuyers compete, bidding wars drive prices up and many U.S. homes are selling above their asking price.
Prospective buyers looking to take advantage of low mortgage rates should act quickly. It is unclear how long the current rates will stick around. Once these rates rise, buyers will ultimately pay more in interest and payments to own a home, even if home prices drop.
Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.