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.
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