What the Experts Are Saying About the Current Housing Market

Blog posted On November 23, 2021

To buy or not to buy? Many hopeful homeowners are wondering. While some signs in the housing market might push you toward, “it’s the perfect time to buy,” others might make you feel, “maybe I should wait.” Home prices are rising, but mortgage rates are trending at generally low levels. So, what do you do? Some people decide to trust their gut, but we decided to trust the experts. Doug Duncan, Fannie Mae’s senior vice president and chief economist, weighed in on the market and whether it’s the right time to buy.

1. Mortgage rates are still trending near low levels, but are predicted to rise

Though mortgage rates aren’t quite as low as they were in 2020, they’re still trending at relatively low levels compared to pre-pandemic rates. Many housing market experts predict that rates will continue inching up as the economy continues to gain strength. Recently, the Federal Reserve announced that it was going to begin tapering asset purchases. Although asset tapering does not directly affect mortgage rates, it has historically caused interest rates to rise. The Fed expects that the tapering process will be completed by mid 2022.

Additionally, the Fed has said that it expects six interest rate hikes by 2024. Right now, the benchmark interest rate is still in the 0% to 0.25% range. When the coronavirus pandemic began, the Fed made an emergency decision to bring the benchmark interest rate near zero. This typically makes borrowing money easier and is one tool that the Federal Reserve uses to help stimulate the economy. Now that the economy is stronger and in a more stable place, the Fed will likely begin raising the benchmark interest rate soon. Inflation is high right now, and one way that the Fed can help bring it down it is by raising the benchmark interest rate. Again, this won’t directly set mortgage rates, but will likely push them higher.

“Come 2022, rates will be generally trending higher,” writes Greg McBride, chief financial analyst at Bankrate. Kate Wood, home and mortgage expert at NerdWallet, “mortgage rates might be on a ‘long-lasting upward trend’ soon.” 

2. The market is competitive, but not as “frenetic” as beginning of the year

In 2020 alone, bidding wars increased by over 400%. In April 2021, 74.3% of home offers written by Redfin agents were involved in a bidding war. With more competition in the market, home prices rose higher and higher. Plus, to win bidding wars, many home buyers were making offers that were thousands of dollars over asking price anyway.

Now, we’re seeing the competition starts to cool off a little bit. In September, bidding wars saw their fifth consecutive month of declines. Just 58.9% of offers written by Redfin agents were involved in a bidding war that month. One reason could be the typical seasonal slowdown we see in the housing market during Fall and Winter months. “It’s typical to see a decline in competition as families head back to school and the weather cools down,” said Taylor Marr, Redfin deputy chief economist. “Buyers also aren’t having to offer as much above the asking price as they were in the Spring, when competition in the housing market was peaking.” Ironically, buyers can thank rising mortgage rates for the lower prices and cooler competition as well. “As mortgage rates continue to rise, we can expect bidding wars to keep slowing.”

The decrease in buyer competition could also be related to rising home inventory. “There’s been a bit more inventory of homes available for sale to come on the market and things aren’t as frenetic as earlier in the year, but this is still a very hot housing market where demand far exceeds supply in most markets,” said McBride. Overall, “current market conditions remain conducive to home purchase activity,” according to Duncan.

3. Buyers should be aware of the market climate, but focus more on their personal situation

Understanding what’s going on in the market is important when buying a home. But the most important factor is you. Regardless of what’s going on in the market, you need to be ready to buy a home. It could be a ‘great time to buy’ according to the market, but if you’re not personally prepared, then it’s likely not the right time to buy.  “Making the biggest financial decision of your life under duress is not a recipe for success,” says McBride. Rather than making your decision primarily based on what other people are doing or where the market is trending, take a look at your own needs and wants. “[You] should focus on personal life circumstances and how long [you] think [you’ll] be in the area,” says Mark Palim, deputy chief economist at Fannie Mae.

If you want to weigh out different home buying options, try our mortgage calculator. If you need some extra guidance in your home buying decision, let us know.