When the Federal Reserve aggressively raised interest rates to cool inflation this year, a wide range of loans we use to buy things like cars and homes also got more expensive. Higher rates also impacted anyone looking to sell a home, as the value of home equity for many homeowners decreased.
Skyrocketing mortgage rates, which hit two-decade highs in November, have thrown cold water on a hot housing market that saw prices shoot up 42% since the pandemic's onset as homes became less affordable to many prospective buyers.
The decline in affordability has forced many would-be homebuyers out of the market, smothering sales and hurting prices. Some housing economists predict only a modest decrease in prices next year, while others see a crash coming.
So what does this mean if you want to buy a house? There may be light at the end of the tunnel—at least when it comes to home prices. Depending on how high the Federal Reserve hikes rates to fight inflation, we could see higher mortgage rates send home prices even lower.
If you can afford to wait, it could mean big savings. But if you're waiting for home prices to fall to the same levels as before the pandemic, you might be waiting a while (and perhaps, even forever).
- Kristin
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