For the past two years, home sellers have been in the driver’s seat of a fast-paced housing market while buyers have gone toe to toe for what few listings were available in their respective areas, but that dynamic appears to be changing. As interest rates creep toward new highs, buyers are pulling back from home purchases, and sellers are responding by reducing their asking prices. Housing experts are scratching their heads and revising their forecasts, but with little certainty about any possible resolution over the next several months.
The median price for newly listed homes fell 1.5% from its peak high during the four-week period ending June 26, and 6.5% of listings dropped their prices each week on average, The New York Times reports. As demand continues to fall amid a growing affordability crisis, prices are expected to dip slightly in the near future, but are unlikely to collapse as homebuying activity remains relatively strong halfway through the year.
Experts aren’t anticipating that rates will return to the elevated levels of the 1970s and 1980s — they peaked at 18.4 percent in 1981 — but until inflation recedes, they will keep rising.
“When inflation peaks, mortgage rates will have peaked, and that’s really the key ingredient,” said Greg McBride, the chief financial analyst at Bankrate.com. “If we get more inflation numbers like we did a couple of weeks ago, there is no telling how high mortgage rates could go.”