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As mortgage rates climb beyond 6%, prospective buyers are putting their home purchasing plans on the back burner while homeowners are becoming more hesitant to list their properties and enter into the opposite end of a volatile housing market as buyers. Despite waning homebuyer demand and a lack of new inventory, home prices continue to reach new highs across the U.S., and experts warn that it may take a recession to bring them down, Redfin reports.
During the four-week period ending September 18, the median home sale price rose 8% year-over-year to $371,850, but prices in some popular metros like San Francisco, CA, Oakland, CA, and Buffalo, NY are rebalancing after reaching unsustainable levels during a mid-pandemic homebuying boom.
“There has been a lot of talk of a ‘new normal,’ but what’s happening in the housing market feels more like a ‘new weird,’” said Redfin Deputy Chief Economist Taylor Marr. “The impact of the Fed’s inflation-curbing strategy is seen clearest in the housing market as prospective buyers take a big step back, slowing sales. But since the vast majority of homeowners who might consider moving have a mortgage rate far below current levels, there’s very little new supply hitting the market. As a result, home sale prices have picked up in recent weeks, and the typical buyer’s monthly mortgage payment is just a few pumpkin spice lattes shy of its all-time high. The irony is that it may take renewed fears of a recession to bring some relief to buyers in the form of lower prices.”
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