Real estate experts say the spring buying season will be an extraordinarily tough one for anyone who’s in the market to buy a home, unlike any year in living memory.
The facts speak for themselves. The inventory of homes for sale has never been as low as it is now. Home prices are still rising by double-digit percentages annually, and mortgage rates are also on the rise.
“For the buyers, it’s going to be miserable,” Mark Zandi, chief economist at Moody’s Analytics, told realtor.com “We’re going to see a lot fewer home sales this spring. … In many communities, they [just] don’t have something to sell.”
His sentiment was shared by Gay Cororaton, a senior economist for the National Association of Realtors, who agreed it will be a “tough market” for anyone buying. “There are more bidders than houses out there,” he said of the market.
Conditions will be worse this year than in the previous spring season. The higher home prices were offset to an extent by record low mortgage rates 12 months ago. But this year things are different, with rates rising above 4% and impacting many borrowers’ mortgage payments. As such, many aspiring home hunters will likely find themselves priced out of the market, economists warn, while those who are financially ready can expect to find the best opportunities.
“People who are just at the margins of being able to afford a home will think twice about buying,” Cororaton predicted. “The upper-income brackets will be the ones jumping into the market. It just makes it all the harder for the lower-income folks.”
The good news is that housing inventory levels are likely to rise over the next few months. Danielle Hale, chief economist at realtor.com, said she expects to see “a bit more inventory and somewhat fewer home shoppers”. However, that’s probably not likely until the latter part of spring, she said.
Another economist, Len Kiefer of Freddie Mac, said it could take as long as four or five years for the industry to ramp up enough homes to meet the level of demand. He pointed out that builders are still struggling with problems around labor and lot shortages, and the cost of key building materials such as lumber continues to rise. These problems are preventing them from adding to inventory, Kiefer said.
On the other hand, Hale said some buyers may find the rising mortgage rates are a relief.
“Mortgage rates will be both friend and foe to buyers this year,” Hale said. “Monthly mortgage payments will be higher. However, those higher monthly payments are likely to knock some home buyers out of the market. You may see somewhat less competition.”