After two years of record-breaking price gains, supply chain disruptions, shortages, and heightened competition, a recent spike in mortgage rates could pose the biggest challenge yet for a supercharged housing market. The average 30-year fixed mortgage rate rose to 4.42% on March 24, and upward pressure from the Federal Reserve could cause more gains in the coming weeks in an effort to combat inflation.
Buyers already sidelined by record home price growth are at risk of being priced out entirely, and even investors could begin to slow down after years of nonstop activity. Higher rates will likely cool off an overheated market, according to Fortune, but unless significant housing supply is added to the for sale market, affordability will remain out of reach for a growing number of buyers.
In the eyes of Logan Mohtashami, lead analyst at HousingWire, we should root for rising mortgage rates to pull some steam out of what he considers a "savagely unhealthy" housing market. The current rate of home price growth isn't sustainable: Simple economics dictates it can't outpace income growth forever.
"Everyone should embrace higher rates to cool off this madness, and hope inventory rises," Mohtashami tells Fortune.
Advertisement
Related Stories
New-Home Sales
More Than Half of All Homebuyers Say They Prefer New Homes
This trend comes as the price gap between new and existing homes narrows
Demographics
Gen Z, Millennials Find Creative Paths to Homeownership
High mortgage rates are causing younger generations to ‘house hack’ or move back home with their parents
Housing Markets
10 Housing Markets With the Highest Rate of Investor Homeownership
Cities with the highest share of investor homeownership are also the places seeing a slowdown in the market due to high costs