Housing Market Crash 2022: What To Expect As Interest Rates Rise
Key takeaways
- Existing home sales dropped 0.4% from July, with an overall drop of 19.9% from one year ago. This is attributed to higher mortgage rates that made monthly payments more expensive than ever.
- Google Trends shows that search queries for “real estate market crash” have skyrocketed in the last month.
- Mortgage rates have hit a 20-year high as the Fed tries to fight inflation and cool down the economy.
Many hopeful homeowners have been waiting for a housing market crash so that they can finally enter the market. While it appears that home prices are softening, houses are not becoming more affordable since mortgage rates skyrocketed, reaching a 20-year high.
THIS IS A VERY SERIOUS COLLAPSE
Consumers are uncertain about the economy's future as inflation continues to soar. While the Fed continues to raise rates to restore the balance of supply and demand, many potential home buyers aren’t sure what to do. They want to enter the market, but many of us are dissuaded by a fear of a recession.
Due to rate hikes, the real estate market is cooling down regarding sales and prices. However, there’s more to the story as the battle against inflation wages on. We will look at the possibility of a housing market crash as interest rates rise.
Why are interest rates still rising?
The Fed has been raising interest rates since March 2022, when they finally had to concede that inflation was no longer transitory. When the cost of borrowing money goes up, mortgage rates are impacted. The Fed has even hinted at interest rates reaching 4.6% in 2023.
FED CHAIR SPEAKS ON RATE INCREASES
As the Fed combats inflation by increasing rates to slow down the economy, there are going to be many sectors that feel the pain. The housing market is one area where the consequences will be felt since mortgage rates will make consumers hesitant to enter the market.
What do rate hikes mean for the housing market?
Interest rate hikes are intended to slow down the housing market, which has catapulted itself to new heights over the past few years.
The country was already dealing with a housing shortage before the pandemic started. Then, when the pandemic hit, many people were working from home and had the flexibility to relocate.
With so many Americans opting to relocate due to newfound freedom from remote work, this increased demand in smaller markets and led to bidding wars.
The biggest issue with rate hikes is that everything becomes more expensive for the average consumer. This is frustrating since inflation is already responsible for rising prices, and people have to deal with additional increases regarding internet rates.
Soaring interest rates are making mortgage payments more expensive. In September 2022, the average rate of 6.29% on a 30-year fixed mortgage meant an additional $600 was added to the monthly cost of being a homeowner on top of the increased costs of everything else.
Moving forward, potential homebuyers will be hesitant about getting into the real estate market because it costs more to borrow money. This doesn’t even factor in any additional assistance needed for home upgrades.
MORE INFLATION,' FOOD & ENERGY SHORTAGES MEANS COLLAPSE
What’s happening with the real estate market right now?
LEBANON AND MANY MORE
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