After peaking to new highs this summer, home prices are beginning to fall as elevated mortgage rates whittle away at housing affordability and put a dent in homebuyer demand. Though many housing experts argue that today’s market is vastly different from the one that led to the housing bubble and bust preceding the Great Recession, a market correction is expected to bring about big changes in the year ahead. Just how drastic those changes are depends on housing inventory and the trajectory of mortgage rates, Realtor.com reports.
High demand from first-time buyers will likely prevent home prices from plummeting, but popular markets such as Austin, Texas; Phoenix; San Diego; and Boise, Idaho, could see significant price drops in the year ahead, especially if housing supply remains historically low.
Builders, many of whom stopped construction during the Great Recession, currently can’t scale up fast enough. The dearth of homes on the market has been responsible for the record prices, bidding wars, and shockingly high offers over the asking prices during the pandemic as too many buyers compete for too few homes.
The second big departure from the 2000s is mortgage lending isn’t built on a house of cards. Not just anyone can get a mortgage nowadays. Lenders have tightened their criteria for doling out money, and only the most qualified borrowers can score loans. That’s a 180-degree shift from the days when many lenders weren’t even verifying incomes.
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