July 2022 – Real Estate
While nominal house price appreciation is still strong, the housing market is adjusting to higher mortgage interest rates, which has resulted in a significant decline in home-buying power.
The housing boom of 2020 and 2021 was the exception, not the rule. Record-low mortgage rates, the ability to work from home, and a pandemic-driven desire for more space accelerated demand for homeownership in 2020. In 2021 homeownership demand fell slightly compared with the previous year, but remained significantly higher compared with pre-pandemic levels in 2019. Yet the underlying demographic and lifestyle choices that are important drivers for homeownership demand remained strong in 2021.
Buyers who can pay cash for a home continue to have a huge advantage in the current market, but as the housing boom begins to cool from 2020 levels, and bidding wars are on the decline, non-cash buyers can begin to find homes without fear of being outbid. Buyers will have to deal with higher interest rates, but Buyers who can move forward now can take advantage of lower home prices before rates get too high, and plan to refinance in the future when interest rate decline.
