This article is part of our 2022-23 Housing Market Forecast series. After the series wraps, join us on February 6 for the HW+ Virtual 2023 Forecast Event. Bringing together some of the top economists and researchers in housing, the event will provide an in-depth look at the top predictions for this year, along with a roundtable discussion on how these insights apply to your business. The event is exclusively for HW+ members, and you can go here to register.
The red-hot housing market of the past 2 ½ years was characterized by sub-three percent mortgage rates, fast-paced bidding wars and record-low inventory. But more recently, market conditions have done an about-face. Consumers — and real estate professionals — who have been watching the pandemic-fueled housing market could be feeling distraught by the news about higher mortgage rates, slower sales activity and dampening price pressure.
However, instead of being dejected, now is the opportunity for everyone to become re-educated about what a “typical” housing market looks like. Now it’s important to pay attention to local market conditions, as the housing market correction underway is going to look very different depending on where you are located.
The national median home price rose by more than 40% over the past three years, but in some local markets, prices increased even faster. The run-up in home prices was driven by rock-bottom mortgage rates and pandemic-fueled demand.
As the pandemic took hold in the spring of 2020 and the Federal Reserve cut the federal funds rate to near zero, the average rate on a 30-year fixed-rate mortgage fell to below 3%, the lowest rate on record. But now, the Fed has shifted to raising rates to combat inflation and mortgage rates have set another record — this time for the fastest increase in more than 40 years.