What does this mean for you?
Rising Inflation and Interest Rates...
"Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987."
- Sam Khater, Chief Economist, Freddie Mac (6.16.2022)
"The low rates of the last few years were an anomaly, a combination of freakishly low interest rates and Federal Reserve intervention in the bond and mortgage-backed security market. Now the Fed has ended quantitative easing and is raising rates." - The Washington Post
"Until inflation peaks, mortgage rates won’t either. Without improvement on the inflation front, we don’t know where the interest rate ceiling will be."
- Greg McBride, Chief Financial Analyst, Bankrate
"I'd say if you are a homebuyer, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again."
- Jerome Powell, Chair, Federal Reserve (6.15.2022)
In order to do this, there will need to be an economic slowdown, which can lead to a recession.
Throughout history, during a recessionary period, interest rates go up at the beginning of the recession (like we are seeing now). But in order to come out of a recession, interest rates are lowered to stimulate the economy moving forward. Historically, we have seen a repeated uptick in interest rates followed by lowered interest rates.
"Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over." -Fortune
So where will be end up by the end of 2022?
We are going to see a decrease in demand to pre-pandemic levels.
And... we are going to see an increase in housing inventory...
So...should I buy a house right now? Will the value of my house depreciate?
We will see decelerating home prices, however this does not equal depreciation. In fact, it is predicted that home values will continue to appreciate.
"The root issue of what drives house prices almost always is supply and demand . . . now interest rates affect that. When interest rates go up, guess what, fewer buyers. The demand goes down thus prices are going to soften or not be as cray-cray as they have been. And that’s what we’re seeing right now."
- David Ramsey, Personal Finance Personality
". . . Experts don’t believe the market is in a bubble or a crash is in the cards, like during the Great Recession. The nation is still suffering from a housing shortage that has reached crisis proportions at a time when many millennials are reaching the age when they start to consider homeownership.
That’s likely to keep prices high."
-Realtor.com
Lets Recap:
An economic slowdown would likely bring down mortgage rates, lowering the cost to finance.
Demand and sales are heading back to pre-pandemic levels.
Experts project 9% appreciation this year and more normal appreciation in the future.
Comentarios