Throughout the year, we saw a housing market that was defined primarily by low inventory levels, restricting sales and driving up prices. But things have shifted in the last couple of months.
Higher Mortgage Rates
The impact of higher mortgage rates is beginning to have a noticeable effect on demand. We are now hearing more about buyers pushing back on home prices. Inventory remains low in most markets but is growing steadily, while price growth has slowed to less than 5 percent in many areas.
First-time home buyers are dealing with smaller budgets because of these rate increases, and sellers are now in a situation where they would have to take on a mortgage with significantly higher interest. While mortgage rates are still historically low, the difference in rates is likely to impact their decisions.
A Positive Outlook
The good news is that economic factors are still strong and should continue to promote housing. Unemployment levels are low, incomes are rising, and the economy continues to grow. The stock market has experienced some volatility, but it will most likely only be weighing on the minds of wealthier consumers.
In the future, we are going to see slower price growth and declining sales levels (we anticipate a 2 percent decrease). But sales should continue at a healthy pace if the economy remains strong.
For a more comprehensive housing forecast, read Gonzalez’s comments in Forbes.
*UPDATE ORIGINALLY PUBLISHED HERE: https://blog.kw.com/december-housing-market-update
About Ruben Gonzalez
Ruben Gonzalez is the chief economist at Keller Williams. He leads in-depth research efforts and tracks leading indicators that impact the housing market.
Gonzalez creates ongoing housing forecasts and regularly provides commentary on real estate market trends to a range of national business, real estate and financial news outlets.
Gonzalez received his undergraduate degree and earned his master’s degree in economics from The University of Texas at Austin.