HOUSING MARKET

by Aristotle Bournazos

Over several years, housing prices experienced a continuous upswing due to persistently low-interest rates. Consequently, the Federal Reserve adopted a strategy of increasing interest rates, aiming to counter the upward trajectory of home prices by making mortgages more expensive. Interestingly, the outcome deviated from expectations, as the higher interest rates contributed to a further reduction in the already limited supply of houses for sale causing further increases in home prices. This phenomenon can be directly attributed to homeowners who, having secured low-interest rates, exhibit a reluctance to sell their homes, unwilling to part with the advantageous mortgage rates they had secured. Due to the extremely low supply and high demand, housing prices continued to rise keeping many would-be home buyers unable to enter the market. In disappointing updates for prospective homebuyers, there is little anticipation of a swift turnaround. Forecasts indicate sustained high prices, a persistent shortage in inventory, and the possibility of further increases in interest rates.

The sustainability of this situation is uncertain. Should interest rates decrease, there could be a surge of homebuyers rushing to make purchases to capitalize on the lower rates. Conversely, a swift increase in home prices would likely follow.