The housing market has been fluctuating at the whims of climbing U.S. inflation and the U.S. Federal Reserve’s economical interventions. Companies are scaling back, the stock market is on the decline and mortgage interest rates are on the rise. However, a recent report claims hopeful homeowners may have something to look forward to. The housing industry may soon begin shifting to a buyer’s market.
According to realtor.com, home prices are beginning to fall and are expected to drop far more still.
“The Fed is determined to cool inflation, and they’re willing to throw housing under the bus to do so,” Devyn Bachman, senior vice president of research at John Burns Real Estate Consulting, told realtor.com. “When you raise [mortgage] rates to the point they’re at today, it breaks the back of housing.”
As inflation and rising interest rates continue to deter potential homebuyers, home sellers are realizing that they have missed the market’s peak and have begun cutting prices.
“The deceleration in housing prices that we’re seeing should help bring … prices more closely in line with rents and other housing market fundamentals—and that’s a good thing,” Jerome Powell, chair of the Federal Reserve, said in a press release. “For the longer term, what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again.”
Mortgage rates have more than doubled over the past year, climbing from an average 2.87% for 30-year fixed-rate loans to 6.7%.
“Inflation is absolutely in the driver’s seat, particularly as it pertains to mortgage rates,” Odeta Kushi, deputy chief economist at First American Financial Corporation, told Time. “Until we get some sustained evidence that inflation is beginning to recede, the upward pressure on mortgage rates will remain.”
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