July 12, 2022

Housing market could tip toward balance

In part because of the Federal Reserve’s recent hikes to baseline interest rates, mortgage rates are rising.

Rates on 30-year mortgage products are at their highest since 2009, which was right in the middle of the Great Recession.

Investors who buy mortgage-backed securities have already factored in expectations the Fed will continue to raise rates this month, and throughout this year.

Lenders, consequently, must raise mortgage rates so that they can continue to sell loans to investors – and those sales generate the funds used to produce more mortgages.

While some additional Fed tightening is already baked into today’s average mortgage rates, ongoing inflationary pressure remains likely to push mortgage rates even higher.

The Fed itself had been a major buyer of mortgage-backed securities during the pandemic, but is now planning to sell off its balance sheet of bonds, including these securities. That could impact liquidity in the mortgage market, and lenders would again need to make up the difference by raising rates.

Already, recent data shows the effect surging rates are having on the housing market.

The gains have reduced the pool of eligible homebuyers, causing pending home sales to slide the last five months in a row.

But despite all these affordability issues, prices are so far not cooling. With the limited supply of houses available for sale, the median home price in the U.S. is now roughly $77,000 higher than a year ago.

Even in times of economic uncertainty, homeownership is a vital for building wealth and community.

Analysts are hopeful the market is beginning the process of balancing out, with more people listing their homes, and more price cuts among current sellers. Those still interested in homebuying could have a lot more to choose from as supply comes into better balance.

Rates go up and rates go down. Good companies and good Loan Originators help their borrowers regardless of the variables. Bay Equity Home Loans was built on a set of Core Values, dedicated to exceptional customer service and innovative programs.

Bay Equity has a full array of loans with down payments as low as zero to 3.5%, including VA, FHA and USDA. We can help access many private and local down payment assistance (DPA) programs, too.