The US housing market is caught up in a heated conflict between competing forces. Home prices are under pressure on one side due to worsening affordability brought on by a jump in mortgage rates from 3% to over 6% in 2022, immediately following a nationwide increase in home prices of more than 40% during the Pandemic Housing Boom.
On the other hand, the lack of available inventory is pushing up home prices. This is made worse by the so-called “lock-in effect,” which makes many homeowners unwilling to sell and buy again out of concern that they would lose out on a mortgage rate reduction from 2% to 3% to one in the 6% to 7% range.
Housing economists advise not ignoring either force. Many potential purchasers were taken off guard by the rise in mortgage rates in 2022, which reduced their purchasing power and made housing more expensive.
The Federal Reserve Bank of Atlanta’s index of housing affordability (or, more accurately, lack of affordability) has reached levels not seen since the bubble’s peak in 2006 as a result of the rapid increase in mortgage rates.
The housing market downturn that resulted from the affordability crisis last fall was most pronounced in the overheated Southwest and West Coast areas.
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Impact On Homebuyers And Market Dynamics
Numerous prospective buyers are still deterred by the affordability crisis, which is slowing demand and reducing property sales.
Due to the historically low interest rates, homeowners are hesitant to give up their favorable financing arrangements, which restricts the availability of homes.
In June 2023, there were 28.9% fewer properties offered for sale than in June 2019 and 26.2% fewer than in June 2022, according to Realtor.com.
Home prices increased in most areas during the first half of the year—the traditionally strong period of the year—as a result of the tight supply and increased buyer competition.
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Source: www.msn.com