High mortgage rates, high demand, high home prices

Mitchell Hartman Jun 28, 2023
Heard on:
HTML EMBED:
COPY
The spike in mortgage rates has encouraged a lot of would-be sellers to stay put, putting a further squeeze on the housing market. Joe Raedle/Getty Images

High mortgage rates, high demand, high home prices

Mitchell Hartman Jun 28, 2023
Heard on:
The spike in mortgage rates has encouraged a lot of would-be sellers to stay put, putting a further squeeze on the housing market. Joe Raedle/Getty Images
HTML EMBED:
COPY

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.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.