- SUMMARY
The dynamics of the current housing market are intriguing.
Despite record-low inventory levels, sales have slowed due to rising mortgage rates.
However, unlike last year, there is a gradual increase in new listings, indicating a potential for more sales if rates drop.
The key factor driving the market is mortgage rates.
Historically, when rates fall, demand for homes increases, and vice versa.
Currently, rates are on the rise, suppressing sales.
However, the lack of inventory acts as a counterbalance, preventing a drastic decline in prices.
Pricing, which has been a key concern, has stabilized after the abnormal crash of 2022.
It is now in a delicate balance between rising rates and low inventory.
As long as rates remain elevated and inventory remains scarce, price growth is likely to moderate.
A drop in rates could reverse this trend.
Another aspect of the situation is the potential inflationary impact of high interest rates.
By keeping people locked into their mortgages with lower rates, these rates limit home purchases and free up funds for other spending.
However, a concerning trend is the slowdown in permits for apartment construction, which could lead to a supply shortage in the future.
In the short term, ample housing inventory and construction will help curb inflation.
However, long-term concerns remain about the future supply of apartments, which could have implications for inflation down the line.
- Key Takeaways
Mortgage rates play a crucial role in home demand
Historically, when mortgage rates fall, demand for homes increases, and vice versa.
Currently, rising mortgage rates are suppressing sales.
Limited inventory mitigates price declines in the face of high mortgage rates
Although rising mortgage rates typically lead to declining home prices, the lack of inventory is countering this effect, preventing a drastic decline in prices.
Future apartment supply concerns could contribute to inflation
The slowdown in permits for apartment construction raises concerns about a future shortage in supply, which could exacerbate inflation down the line.