What do higher rates & housing prices mean for home sizes?
Redfin reviewed what higher housing prices and rising rates mean to buyers in the greater San Diego, CA area. The takeaway is that higher housing costs have cost home buyers more than 400 sq. ft. of living space. The study concluded that a homebuyer with a $3,000 monthly budget in San Diego can afford a 931 sq. ft. home at the current mortgage rates. That’s down from 1,366 sq. ft. that a home buyer could afford with the same budget a year ago.
True housing market stories
Marketwatch detailed how frustrations of home buyers have changed. A year ago, home buyers had to contend with bidding wars to get into a home. Now? High mortgage rates are the barrier to entry for several prospective home buyers.
To make matters worse, they’ve seen markets become what experts call ‘Tornado Markets’. A tornado market is fairly unpredictable and depends a lot on timing, location, and other factors that influence market conditions. New York City has turned into a tornado market with some houses getting bidding wars and others going ignored.
The overall sentiment is that home prices should start to come down sooner rather than later, but the home buyers surveyed expressed a lot of frustration at previous and current conditions.
Interest rate course change?
A report from the United Nations Conference on Trade and Development claimed that the world is on the brink of a recession due to current monetary policy and urged organizations like the Federal Reserve to adjust their course.
Jeff Cox at CNBC opines that the Fed won’t be so quick to slow down rate hikes. However, he has also heard chatter that their next rate hike in November will likely be the last of the year.
It’s also widely believed that the current stock market rally in the U.S. is due to the belief that the Fed will start slowing rate hikes.
While a slowing of rate hikes would likely be welcome news to the ears of home buyers, the Federal Reserve had a hawkish tone all last week and will likely need to see a dramatic slowdown in inflation before making a change.
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