Buying a Home

At its May 3-4 meeting, the Federal Open Market Committee (FOMC) raised the federal funds rate by half a percentage point in an effort to curb the United States’ highest inflation in four decades. Federal Reserve Chairman Jerome Powell suggested that other 50 basis-point increases can be expected in future FOMC meetings.

The rate hike is part of the Fed’s larger effort to reduce its $9 trillion balance sheet beginning June 1. Why is the balance sheet so high? The Fed’s portfolio more than doubled over the past two years as they purchased bonds to keep long-term borrowing rates down.

How it impacts the summer housing market

What does all of this mean for the housing market this summer? Rates may continue to climb, which could keep some buyers at bay, but industry leaders like Fannie Mae say home prices may still rise.

A Fortune article reported on the likelihood of housing markets falling over the next 12 months as assessed by CoreLogic, a real estate research company. In the article, CoreLogic found that of the 392 regional markets measured, 86% fall into the “very low” or “low “chance of a decline in home price.

Although mortgage rates have climbed, the lack of inventory is likely to keep the demand for homes high. CoreLogic noted a 20.9% year-over-year gain in home prices from March 2021 to March 2022 and predicts that home prices could continue to grow nationally through 2023.

The National Association of Realtors® (NAR) found that the median single-family existing-home prices rose to $368,200, a 15.7% increase from last year. NAR chief economist Lawrence Yun stated price declines may be unlikely since inventory is still extremely low. However, Yun said higher mortgage rates may lessen the demand for homes.

Don’t let higher home prices stop you from your homeownership goals. PrimeLending, a PlainsCapital Company® has the home loan options you need to make the best offer in a seller’s market. Contact a mortgage expert today.

Written By Becky Bruning