The housing market has undergone a notable shift during the typically busy spring selling season. Dramatic spikes in mortgage rates left buyers reconsidering purchasing decisions while sellers experienced fewer bidding wars and fewer bids over asking price. The rental market is also experiencing a pivotal moment, with skyrocketing rents causing stark competition between would-be-renters. The New York Times gathered insight from economists, real estate brokers, and industry analysts on how the market reached this pivotal moment and what is ahead in the near future.
What’s Going on with Interest Rates?
Experts aren’t anticipating that rates will return to the elevated levels of the 1970s and 1980s — they peaked at 18.4 percent in 1981 — but until inflation recedes, they will keep rising.
“When inflation peaks, mortgage rates will have peaked, and that’s really the key ingredient,” said Greg McBride, the chief financial analyst at Bankrate.com. “If we get more inflation numbers like we did a couple of weeks ago, there is no telling how high mortgage rates could go.”
Can We Expect Home Prices to Fall?
Prices are unlikely to take a nosedive, but cracks are showing. In the four-week period ending June 26, the median asking price for newly listed homes was down 1.5 percent from its all-time high this spring, and, on average, 6.5 percent of listings dropped their prices each week, according to a Redfin report.
Demand is down, too. The same Redfin report found that fewer people were searching Google for homes and asking to tour properties. Mortgage applications were down 24 percent, and pending sales fell 13 percent from the same time a year earlier, the largest drop since May 2020, according to Redfin.
What If You Want to Rent?
Pick nearly any city across the country — Austin, Nashville, Seattle, New York — and the story is one of rents rising by double-digit percentages amid scant inventory.
Nationally, the vacancy rate is below 5 percent, with more than a dozen renters competing for any given vacant apartment, according to RentCafe. That translates to extraordinarily high rents. In Manhattan, the median rent reached a record $4,000 a month in May, according to data from Douglas Elliman. The same month, the typical U.S. asking rent passed $2,000 for the first time, according to Redfin.
The rental market has been on a wild ride since the spring of 2020, with no end in sight.
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