High mortgage rates, high demand, high home prices
High mortgage rates, high demand, high home prices
Home prices are on the rise — again. When mortgage rates started to climb last year, folks looking to buy actually got a bit of a respite from years of steep home-price increases. In major metro areas, prices started to fall.
But that’s now reversed. The Case-Shiller National Home Price Index rose half a percent in April — a third-straight monthly increase. New home prices are also up for two months running.
Home prices soared through the pandemic, as people found they could work from home and home could be in a cheaper or better place to live, said Chris Mayer at Columbia Business School.
“The overall impact was basically an increase in demand for housing — that has not abated,” he said.
Last year, as mortgage rates rose, some buyers got priced out and some sellers cut their asking prices to offset buyers’ higher monthly mortgage payments.
But the spike in mortgage rates has also convinced a lot of current homeowners to stay put, and not sell. Because if they move, their new mortgage is likely to be more expensive.
“We have a lot of people looking to buy,” said Zillow economist Nicole Bachaud. “What we don’t have is a lot of people who are trying to sell. And that’s one of the reasons why we’re seeing prices starting to increase again.”
Meanwhile, she said, many would-be buyers are afraid of missing out.
“We’re seeing a lot of buyers in the market right now, even though it’s so unaffordable, because price is starting to rise again, and it’s not looking like it’s going to get a whole lot better.”
That’s because mortgage rates likely to stay elevated for a while.
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