High interest rates are one of the main reasons for the current slowdown in the real estate market. The Federal Reserve has raised interest rates several times in recent times, pushing benchmark rates to a 22-year high. This has caused mortgage rates to rise, increasing the cost of homeownership and significantly reducing buyers' affordability.
Some individuals who had plans to purchase a home may choose to delay their decision, waiting for interest rates to decline or seeking more attractive loan options.
Furthermore, high home prices pose a challenge to the housing market. In recent years, prices have continued to rise, especially in major cities and tight markets. This has made it unaffordable for many potential buyers to afford local housing prices, leading them to abandon their home-buying plans or search for alternative options.
High home prices also impact market liquidity, as homeowners may be reluctant to sell their properties at current prices, resulting in inadequate supply.
Moreover, a shortage of housing supply is another issue faced by the current real estate market. Despite a decrease in demand for home purchases, the inventory of existing homes remains relatively low.
Many homeowners are hesitant to sell their homes due to concerns about not being able to find lower interest rate mortgages, further weakening the market's supply. The supply-demand imbalance keeps pushing housing prices upward while also limiting the options available to buyers.
There are several factors to consider regarding the future trajectory of the real estate market. Firstly, the adjustment of monetary policies by the Federal Reserve plays a significant role. If the Federal Reserve slows down or pauses its rate hikes, mortgage rates may decline, boosting buyer confidence and purchasing power.
Secondly, government policy measures are crucial. The government can stimulate real estate market activity and promote economic growth through tax cuts, regulatory policy adjustments, and other means. Additionally, achieving a balanced supply-demand relationship will also be essential for the real estate market's recovery.
