This year began with signs showing that the Federal Reserve’s inflation-fighting tactic was effective in cooling down the steamy pandemic housing market. For the first time in a very long time, mortgage rates more than doubled following the Fed’s consecutive interest rate hikes, which in turn curbed affordability. Despite this, the median price of a home increased month over month. Home prices are strengthening, and sales are decreasing, why? There is a huge lack of housing inventory and many more buyers in the market than sellers.
Where are home prices headed?
In a perfect housing market high mortgage rates usually prompt home prices to decrease, an inverse relationship. In this particular market, the housing supply remains so restricted and the demand remains so high that prices have been holding steady. Insufficient supply is prompting a very competitive sellers’ market, where buyers are bidding up prices, even with high mortgage rates. Home prices remain stubbornly elevated, making affordability challenging for many. The data is suggestive that where home prices dip or climb this year remains heavily region-specific. It is all about location.
Experts are predicting this environment to continue and make for a very sluggish housing market recovery. Mortgage rates were down the first week of May only to rise the rest of the month, according to Freddie Mac. Rates remain stuck between 6 and 7%, reaching 6.79% on June 1st-the highest they have been since Nov of 2022. “If current economic conditions persist, with elevated mortgage rates and home prices amid scarce inventory, the market is likely in for a long, slow climb and a few bumps along the way” said Danielle Hale, chief economist at One of those many bumps includes the new mortgage fee rules imposed by FHFA. As of May 1st, conventional mortgage borrowers who place between 5% and 25% down will pay more in fees- which is also known as loan-level price adjustments- than those who put down less than 5%. The Biden-Harris administration revised the mortgage fee rules to hopefully make homeownership “more attainable and affordable for more low-and middle-income borrowers”. This change has driven much criticism from many housing experts, the higher fees will hit people who are considered less risky. Stay tuned for how this change will affect home shoppers.
Tips for Buying a Home in Today’s Market
Flexibility- Even if prices begin to decrease, you may realize that the area you prefer to buy a home in is still out of reach. It is important to stay flexible. “If you badly want a house and can work remotely or switch jobs, moving to a lower-priced housing market is a good idea to consider, “says Robert Frick, corporate economist at Navy Federal Credit Union.
Review your financial situation- Get all your ducks in a row: gather documents, shop multiple lenders, and strengthen your credit score. “Only the best prepared, with their financing lined up, a solid understanding of what they can afford, and constant checking of prices and listings will be successful in today’s highly competitive market,” says Frick. BE PREPARED.
Tips for Selling a Home in Today’s Market
Work with a reputable agent – It is important to get the pricing right. Homes that are priced correctly are the ones that get competition and bidding wars, while others linger on the market. A reputable agent who is knowledgeable about your specific market can help you take the emotion out of pricing. This ensures you come on the market in the right price range and target the right buyers.
Prepare your house to sell – Make any home improvements that will increase your home’s value prior to entering the market. Always be ready.

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