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5 min read. August, 2022 – by Phil Fernandes
After a year of rock bottom rates, soaring demand, and bidding wars, the housing market is starting to slow down. In June, Redfin reported that 60,000 home purchase agreements fell through, which is the highest number of cancellations the U.S. has seen since the beginning of the pandemic.
This is partly because many buyers are facing housing affordability challenges — Zillow found that monthly mortgages are up 75% from 2019. High home prices coupled with higher interest rates have priced many potential buyers out of the market.
“The housing market isn’t crashing, but it is experiencing a hangover as it comes down from an unsustainable high,” said Taylor Marr, deputy chief economist at Redfin. Let’s look at why the housing market is slowing down and how buyers can navigate the changing market.
The biggest problem homebuyers are dealing with right now is rising interest rates. As of July 28, rates for a 30-year mortgage are 5.3%, which is up from 2.8% just a year earlier. Many experts forecast that mortgage rates will range from 5% to 7% by the end of 2022.
And even though interest rates continue to rise and home sales have slowed, home prices remain at an all-time high. In June, the median home price was $416,000, up more than 13% from a year earlier.
Home prices have risen exceptionally high in cities that experienced a high level of migration during the pandemic. For instance, you can expect to pay more for a home in Austin and Phoenix.
With inflation at an all-time high and fears of a pending recession, many homebuyers are becoming more budget conscious. That means more and more buyers will be stepping out of the market.
The housing market is starting to slow down, but it’s still relatively competitive. Aggressively priced homes are still selling fairly quickly since many expect rates to rise even higher in the coming months.
If you’re hoping to buy a home in 2022, here are a few steps you can take to navigate the changing market:
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Phil serves as VP of Financing for National Business Capital. He boasts 15 years of sales experience, 10 years of managerial experience, and has been with National for over 6 years. His role at National focuses on managing and directing National’s team of Business Finance Advisors and overseeing project development. Phil is also responsible for Financial Reporting, where he prioritizes results and revenue growth. Phil is passionate about sharing his expertise and insight with small business owners, and regularly contributes articles on National’s blog.