Inflation has soared to its highest rate in four decades. The Federal Reserve has responded by raising their overnight lending rate and indicating that they may do so at each of their seven meetings this year. Mortgage rates climbed the first quarter of this year from the low 3’s well into the 5’s.
If the economy falters, as a reaction to higher interest rates or due to world events like China’s pandemic shutdown or the Ukraine war broadening, interest rates could begin to fall. However, if consumer demand remains strong, and inflation does not decline, then rates could continue to rise into the 6’s.
In the first quarter of 2022, home prices were up almost 20% year over year, 71% of California homes went at over asking price, and the average time on the marketplace was a very short eight days.
Although buying competition and the rate of housing price appreciation appears to be slowing recently, and affordability is becoming an issue with rate increases, economists do not expect housing prices to fall. The housing shortage is still too great (6 million homes short of demand), millennials are in their prime first-time home buying range, wages have increased, and unemployment is down- all of which provides a very strong foundation for housing value.
CMG Home Loans is a registered trade name of CMG Mortgage, Inc., NMLS ID #1820 in most, but not all states. CMG Mortgage, Inc. is an equal housing lender. Licensed by the Department of Financial Protection and Innovation (DFPI) under the California Residential Mortgage Lending Act No. 4150025. CMG Mortgage, Inc. is licensed in all 50 states and the District of Columbia. Offer of credit is subject to credit approval. NMLS Consumer Access (www.nmlsconsumeraccess.org)