Interest rates

Higher interest rates could stabilize the housing market

Despite the housing market challenges, 2022 could be a good year to buy a home.

Over the past year, buyers have seen interest rates rise by around 2% – the highest since 2009 – and house prices rise by around 20%.

The current record house prices tend to disrupt the plans of owners who wish to modernize their residences. With the recent rapid appreciation, lack of inventory and significantly increasing monthly payments, consumers are alarmed and wary of buying or selling their homes. These potential buyers – who would also increase market inventory by becoming sellers – do not want to compete in the frenetic housing market.

The good news is that as interest rates rise, home valuations begin to stabilize. Inventory also begins to increase, a development that generally makes buying a home easier. In fact, estimates that active listings will increase 15% this year, and home sales are expected to “hit their second highest level in 15 years.”

All of these factors indicate that the market will evolve into a more positive climate for home hunters or become a “buyer’s market”.

Homebuyers have been in a strong seller’s market for the past few years. We notice that the days of multiple offers are over. Buyers, once again, can negotiate a better price. Seller-paid closing costs recur frequently to allow buyers to offset higher rates.

There is a natural slowdown when rates move as quickly as they have over the past year.

Where does it end?

The Fed’s approach to “shock the system” includes the U.S. central bank on June 15 raising its interest rate by three-quarters of a percentage point, the highest single hike since 1994.

The objective is to curb the rise in inflation and slow the rise in house prices. Further rate hikes are expected this year as consumer prices continue to rise. So consumers should expect higher interest rates to be the new reality.

Economic trends indicate a stabilization in house prices and the start of price reductions to combat affordability and declining consumer confidence. At a six-month high, 15% of home sellers suffered a price reduction.

Several indicators in the markets point to a possible recession in 2023. Historically, recessions reset the economy and bring the stability we need.

Therefore, I think we will start to see a return to normalcy in the market. The next two years will be a period for the market to stabilize and compress with a reduction in the abundant amount of cash circulating in our country.

So what now?

I believe there are opportunities in the Vegas real estate market.

If you compare your options, the APR is 100%. Considering that the cost of waiting to buy a home equals rent plus market appreciation, on average, those who wait five years to buy a home could suffer a six-figure financial loss. This is calculated by taking the unearned capital combined with the increase in the cost of buying a house.

Consumers should work with a mortgage professional who can thoroughly review current mortgage finances and offers to create a clear plan for buying a home. There are a variety of options and approaches that a qualified professional can educate a consumer on, which will help restore confidence in today’s housing market.

my bottom line

After reviewing trends and forecasts for the rest of the year, home hunters should soon see a revitalization in the housing market. Demand will continue to decline, leaving room for inventory to recover and possibly increase. Therefore, this fall might be the best time to find a home.

Robert Coomer is the founder of The RobertGroup (RCG), which specializes in residential mortgages. With over 20 years of experience, Coomer provides effective mortgage solutions, advice and support to clients from all walks of life. Recently, Coomer partnered with Celebrity Home Loans to strengthen their career focus and provide a greater range of resources and opportunities.