Americans that are planning to buy their dream house this year are likely to have a tough time to find a house that meets their budget as there is a severe shortage of saleable homes in the market and there are lesser “for sale” signs. Also mortgage rates will continue climbing this year too like 2018 which will lead to slowdown in housing market and subsequent fall in sales across the nation. The housing market in US started stalling since 2018 after a sustained growth period due to slower rise in incomes than growth in housing prices. Mortgage buyer Freddie Mac states that the current home loan rate of 4.55% on 30 year home loan is higher than last year.
Realtors forecast that rate of 30 year mortgage on home loans could go up to 5.5% towards 2019 end while Zillow expects it to reach 5.8% which would make them highest since 2008 recession. In a long term loan even an additional ½% rise in interest rates can increase monthly payments by thousands of dollars for an average home buyer. Rising rates of mortgage can reduce affordability and increase pressure on buyers hoping for a windfall to move ahead and close a deal at a rate they can afford now.
This spurt in mortgage rates has already started applying brakes on sales of pre-occupied homes and in November it fell by 7% taking it close to rates when housing market was still recovering from recession in 2011. While some realtors predict that sales of homes will fall by another 2% this year other forecast that number of homes for sale in the market is likely to rise further than last year. The inventory of houses available for sale in US last November had increased by 4.2% as there were nearly 1.74 million units.