Is Real Estate Past the Peak Demand? The housing market has been quite hot since the COVID-19 pandemic struck the United States (and the world) and shook our lives as we knew it in March 2020. The reasons for the housing market heat-up were many. Some people realized that remote work meant they could finally live in the city or town of their dreams. Other people chose to move from places with restrictions that didn’t fit their lifestyles to other places where they were free to do as they wished. This means that housing prices in many areas have spiked exponentially over what they were a year ago. The average home in the United States is worth more than ever before, and interest rates have spiked to record levels since the COVID-19 pandemic waned in earlier 2022. Whether we are over the peak demand for housing in the United States is something that remains debated among experts, but the general consensus is that for the moment, the housing market will slowly begin to cool. How Much Have Homes Increased in Value? The median home in the United States was worth about $305,000 in 2021. Compare that to $392,000 in 2021. It’s clear to see that the average equity homes hold in the United States increased exponentially from 2021 to 2022. Housing prices are expected to go up another 11% in 2022, which will make the average home worth about $435,120 by the end of 2022. In 2023, the housing market is expected to cool exponentially, which means that the median home prices in America are only expected to rise about 2% in 2023, compared to 11% in 2022. That has left many people asking one question: “Why?”. The answer to the slowing in the increase in the values of homes can be summed up largely in one word phrase: “rising interest rates”. Rising Interest Rates Are Predicted to Cool the Housing Market Continually-rising interest rates are largely believed to be responsible for helping to cool the recently red-hot housing market. Fannie Mae believes that there will be a $2.27 trillion dip in the value of mortgages requested by Americans in 2022 over those that were requested in 2021. This decrease will be a result of increasing interest rates on mortgage loans. Many Americans are finding themselves quickly losing money as the interest rates rise. The rising interest rates will also slow down the sales of new homes. As mortgages currently sit at an average of 6.811% for a 30-year-fixed mortgage and 5.6% for a 15-year-fixed mortgage, many people are simply buying homes at the moment because they can’t afford these higher interest rates. Higher Interest Rates Won’t Last Forever While these higher interest rates are putting a temporary damper on the housing market, this isn’t expected to last forever. Interest rates will indeed fall again at some point and the housing market will regulate itself back to a more “normal” level of activity. Fannie May predicts that by mid-2023, the average interest rate will drop back to around 4.5%, which is much closer to a “normal” interest rate for a mortgage. It’s also believed by sometime in 2023 the housing market will regulate itself. The average appreciation rate for homes will be about 2%, which is closer (although lower) than the normal 4-5% appreciation rates home normally experience in an “average” housing market. Conclusions Most experts conclude that we have indeed reached the peak of the housing market demand for the moment and that the demand for housing will continue to regulate from late 2022 into 2023. From there on out, most housing experts believe that the housing market will return to a relatively normal level of activity moving forward. For more information on mortgage rates and what mortgage may be right for you, please feel free to contact us at Movement Mortgage at your earliest convenience. We are here and happy to help you figure out what mortgage works best for you and to help you sell your current home and find the home of your dreams. covid-19 mortgage rates Atlantic Home Mortgage Alpharetta Click to Call or Text: (888) 309-4643 This entry has 0 replies Comments are closed.