Despite a financial frenzy brought on by high inflation, worker shortages, the rise of cryptocurrency markets, and the devastation of the Omicron variant, real estate experts aren’t concerned about a potential housing bubble in the near future. Home prices are expected to keep rising as demand outpaces supply, but the growth rate could decelerate as mortgage rates continue to rise.
Mortgage rates of around 3.56% are still low enough to balance out high prices, Realtor.com reports, so instead of crashing, the market may gradually cool off, though a housing shortage will sustain high prices for months to come.
Rates hit 3.56% in the week ending Jan. 20, according to Freddie Mac. While that less than a full point rise might not seem like much, it adds about $150 a month—nearly $1,800 a year—to the mortgage payment on a median-priced home at $375,000. (This assumes buyers put 20% down.)
Even with these speed bumps ahead, the housing market isn’t likely to see prices fall dramatically like in the stock and crypto spaces.
“People are using the quickly rising, record home prices as a sign of a market in danger of crashing. But it’s the wrong yardstick,” says national real estate appraiser Jonathan Miller. He doesn’t see anything in the economy at the moment that could result in home prices falling 30%—or more in some parts of the country—especially during a housing shortage.
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