Affordability is a hot topic these days. After two years of rapid home price growth and the recent spike in mortgage rates, prospective home buyers are increasingly wondering about the cost. That's natural. When affordability conditions change quickly, it can lead to uncertainty. So what should homebuyers expect in the coming months?
Fannie Mae's Economic and Strategic Research Group has answers. According to their latest outlook, the group believes the housing market is headed for a slowdown in sales and construction activity. That's to be expected, especially while rates are rising. “Historically, rapid and substantial rises in mortgage rates have had the effect of slowing activity, which we reflect in our forecast,” Doug Duncan, Fannie Mae's senior vice president and chief economist, says.
But a slower market should also bring slower price growth – which could help offset higher rates. Recent price increases have largely been driven by a supply imbalance. More buyers than available homes have led to surging prices. When the market slows, and fewer buyers are active in the market, home prices should finally begin to calm down.
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