Warning: Undefined variable $custom_content in /home4/comcompare/public_html/mortgagenews/wp-content/plugins/code-snippets/php/snippet-ops.php(582) : eval()'d code on line 10
The housing market is in a special place this year. Despite rising interest rates on loans, property prices often continue to rise. With that said, it’s hard to deny the headwinds in the refrigerated condo market.
The demand for housing construction decreased. That leaves many homebuyers wondering when – or when – home prices will rise. The real estate market has to deal with both supply and demand bottlenecks.
For most of the year, there was a sort of latent need for housing that has persisted since the start of the pandemic when interest rates dropped to near zero. While 30-year fixed-rate debt has risen sharply since then—which now looks like 5% home prices remain questionably high.
Some see this drastic price increase as evidence of a housing bubble. She, therefore, predicted a future collapse. There are signs that things are starting to cool down.
Mortgage claims are falling sharply. Home sales cancellations also rose 15% last month, according to a recent report from Redfin.
This is the highest amount since the pandemic first hit. As rumors of a potential recession continue to swirl, the housing industry appears ripe for a correction.
Unfortunately, despite the rapid decline in buying conditions, there are many reasons why property prices will remain stagnant for the foreseeable future.
3 Reasons why the housing market is not cooling down
First of all, home prices are unlikely to fall due to limited home building in the United States.
While buying interest has surged with the launch of COVID-19, property construction has slowed to a full crawl.
Homebuilders were hampered by the housing market crash of 2008. The pandemic further slowed the industry.
In addition, there is a slowdown in the global supply especially of raw materials such as wood and metal – and it is not hard to see what has happened to the hinged construction industry.
The U.S. now has nearly a two-month supply of homes, according to data from Redfin, which is updated weekly.
This is a far cry from the five to six months of supplies the country usually enjoys. Even if buying conditions deteriorate, unless home building picks up, prices are unlikely to ever fall.
Adding to the supply issues is that many homeowners are increasingly hesitant to sell in today’s market.
Between 1987 and 2007, people lived in their homes for an average of five years. Since then, the number has doubled to 10 years. This is due both to a change in the quality of the house and a slight decrease in average occupancy.
In the past, houses were smaller, less comfortable, and full of many people. As houses improve, it’s no surprise that people are abandoning ships less often. This also means that fewer homes are being sold, which has contributed to the mismatch between supply and demand.
The last point against reducing housing prices is related to the health of mortgage holders.
Mortgage debt as a percentage of disposable income is almost always lower. Short interest rates and rising property prices mean that mortgage holders are putting up equity for relatively small debt payments.
Credit scores are strong, which means prime rates aren’t likely to see a sudden jump, which could boost the supply of homes for sale and short-term prices. As home prices continue to rise, homeowners have less incentive than ever to sell.
Reference Source: Investors Place
