A growing number of homebuyers are being priced out of a supercharged housing market that seems entirely unaffected by elevated inflation and rising mortgage rates. When factoring higher sale prices and mortgage rates, buyers in 2022 are paying 30% more for a home than they would have just one year ago, but that may soon change, says Realtor.com.
Prices may continue to rise throughout much of 2022, but at a slower pace as mortgage rates continue to increase. As affordability declines, so too will home sales, and eventually, home prices will follow suit.
“We’ve hit the ceiling for the housing market for a while,” says Mark Zandi, chief economist at Moody’s Analytics.
“The first thing to fall is going to be home sales. People just can’t afford to buy,” he says. “Then we’ll see price growth start to slow. Ultimately, I expect some price declines in some markets.”
The Federal Reserve Bank of Dallas set off alarm bells when it warned of signs of a brewing housing bubble as “purchases arising from a ‘fear of missing out’ can drive up prices and heighten expectations of strong house-price gains,” according to a recent paper.