Part I of this two-part series focuses on how a possible recession may impact rising mortgage rates and home prices.
The bottom line for buyers and sellers? It’s less risky to buy and/or sell now rather than waiting until next year. Find out why here.
Q – If/when the Federal Reserve raises interest rates again, will mortgage rates also rise?
- Taylor Marr, Redfin Deputy Chief Economist – “The current 6% mortgage rates already have future interest-rate expectations baked in. I expect interest rates to remain high and the housing market to remain relatively quiet for the next few months.”
- Chen Zhao – Redfin Economics Research Lead – “The consensus in the economist community is that the Fed will raise interest rates again in July by 50-75 basis points followed by three smaller hikes later this year…But if inflation remains high…the Fed could increase rates more than expected and mortgage rates could rise again.”
Q – Is a recession coming? If yes, how a recession could impact housing market?
- Daryl Fairweather – Redfin Chief Economist – “The likelihood of the US entering a recession late this year or in 2023 has increased over the last few months…but…the housing market looks resilient. In the long run, housing is a stable investment and less risky than other assets.”
- Marr – “Home prices have passed their peak. A lot of homes are less valuable now than they were a few months ago-but they’re still more valuable than they were three years ago, and they’re likely to stay that way…if (a) recession is mild, mortgage rates could fall…”
- Zhao – “…It does seem like we’re set up for a textbook recession that’s fairly mild…even in a mild recession, the unemployment rate would likely tick up to 5% or 6%, a noticeable increase but not nearly as high as the Great Recession..(therefore) impact on housing depends on employment.”
Q – What’s going to happen to home prices?
- Fairweather – Whether or not there’s a recession, home prices will decline from their peak. “But prices aren’t likely to fall below pre-pandemic levels nationwide.”
- Marr – It depends. “Places that had big demand booms during the pandemic like Boise and Sacramento will likely see prices decline, while places that remain relatively affordable may not…For a lot of homeowners, the decline is only on paper. If you’re not selling or refinancing your home in the next six months or year, your home being worth a little less now than it was a few months ago won’t impact you. Home values typically rise over time.”
- Zhao – “For homeowners, buyers and sellers, all that matters is what happens in your neighborhood. That’s going to vary a lot from place to place. Buyers and sellers should pay attention to their local area.”
Thanks to Redfin.
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