Home buyers have contended with surging prices for nearly two years throughout the COVID-19 pandemic, and rising mortgage interest rates will likely keep relief out of sight in the months ahead. Mortgage rates jumped to their highest point since March 2020 at 3.45% for 30-year fixed mortgages in the week ending January 13, Realtor.com reports.
Buyers are already grappling with rising inflation and a housing shortage pushing list prices higher, and a difference of just 0.8% could tack an extra $130 a month onto the mortgage payment of a median-priced home of $375,000. Though some buyers remain optimistic that rising mortgage rates could lead to a decline in home prices, experts argue that sustained demand will keep prices on the rise.
George Ratiu, manager of economic research at Realtor.com, believes prices will continue to rise, but in the low single digits instead of the 15% annual rise seen last spring.
“With higher rates, there will be fewer buyers who can qualify for a mortgage this year,” says Ratiu. “This is going to slow down demand and take pressure off fast-rising prices. The buying and selling process will begin to look more normal. We can expect to see less competition and more price reductions. Bidding wars are going to be behind us.”