Will Prices Keep Rising?

November 16, 2021
Will-Prices-Keep-Rising
Rising interest rates are expected to slow the climb of housing prices.

 

Over the past year, U.S. home prices are up a record 19.8% according to CoreLogic. You don’t need to be an economist to know that the current level of growth—which is faster than the run-up to the 2008 financial crisis—isn’t sustainable. But where will this historically competitive housing market go next? According to the latest forecast put out by Fannie Mae, median home prices are expected to rise 7.9% between the fourth quarter of 2021 and the fourth quarter of 2022. While that would mark a slowing from the extreme price growth we’ve seen this year, it would still represent strong growth by historical standards. (On average, U.S. home prices have climbed 4.1% on an annual basis since 1987.)

So, put another way: The housing market, at least in the eyes of Fannie Mae, is set to return to a normal-ish level of price appreciation.  Fannie Mae also expects mortgage rates to climb next year, with the average 30-year fixed rate rising from 3.1% to 3.4%. But the downward pressure on prices from rising rates, the government-sponsored enterprise says, won’t be enough to actually pull prices down.  “Mortgage rates may rise in response to the tighter environment, but we expect the severe shortage of homes for sale to remain the primary driver of strong house price appreciation through at least 2022, limiting interest rate effects on home sales and home prices,” wrote Doug Duncan, chief economist at Fannie Mae, in its latest 2022 outlook.

Source: Fortune