2%, which is substantially less than the 8.5% growth seen last year in 2020. The report suggests that the slower growth rate is due to a decline in housing demand and increasing mortgage rates, leading to a decrease in sales volume. Additionally, the stimulus package passed in March will continue to prop up the housing market, although its effects may not be felt for some time.
The report indicates that the lower growth in housing prices is due to higher mortgage rates, which make it more expensive for buyers to purchase homes. In addition, buyers have become increasingly conservative in their spending due to economic uncertainty, resulting in decreased demand for both new and existing homes. This, coupled with an increase in rental housing inventory, has led to a slow down in home sales and longer listing times.
The increasing cost of homes combined with higher mortgage rates makes it difficult for many individuals to enter the housing market, especially those with lower to middle incomes. Additionally, some potential homebuyers are facing layoffs and reduced work hours due to the pandemic, further limiting their ability to purchase a home. Consequently, these buyers are turning to renting, which is driving up rental prices and squeezing out lower-income renters.
The report notes that the stimulus package recently passed by Congress may help to soften the negative effect of high housing prices and mortgage rates. The package included $25 billion in assistance for homeowners and tenants, as well as funds for the extension of unemployment benefits and direct payments. This could potentially help some of those affected by the economic slowdown to access housing and other resources, thereby stimulating the housing market and helping to slow the rate of home price growth.
While home price growth will slow to 3.2% by August 2023, the current state of the housing market remains uncertain. The stimulus package may help to provide relief to those struggling due to the pandemic, but it is unclear how much it will be able to offset the impact of rising mortgage rates and decreased demand. Nevertheless, this report serves as a reminder that despite short-term market volatility, the long-term outlook for housing remains positive.
This article was contributed on Nov 28, 2023