Zillow's Chief Economist Says "Short-Term Pain" for Housing Market - Here's What That Means for You
The housing market has been a hot topic of conversation over the past year and a half. With skyrocketing home prices and low inventory, many have been wondering when things will start to cool down. According to Zillow's Chief Economist, Dr. Svenja Gudell, we may be in for a bit of "short-term pain" before things improve. But what does that mean for the average homebuyer or seller? Let's break it down.
What is Short-Term Pain for the Housing Market?
Dr. Gudell explains that the "short-term pain" in the housing market will come in the form of higher mortgage rates and a slowdown in home price growth. Mortgage rates have already started to rise, with the average 30-year fixed rate hitting a high of 3.18% in April 2021. This is still historically low, but even a small increase can make a big difference in monthly mortgage payments.
Home price growth has also started to slow down, but prices are still higher than they were a year ago. However, the rate of growth is expected to decrease, which may be a relief for some buyers who have been priced out of the market.
What Caused This Short-Term Pain?
The pandemic has played a big role in the current state of the housing market. With record-low mortgage rates and a shift in remote work, many people have been looking to buy homes in suburban areas, driving up demand and prices. At the same time, supply chain disruptions and labor shortages have made it difficult for builders to keep up with demand, leading to a low inventory of homes for sale.
Additionally, inflation is on the rise, which has caused the Federal Reserve to consider tapering its purchases of government bonds and mortgage-backed securities. This could lead to an increase in long-term interest rates, including mortgage rates.
What Does This Mean for Homebuyers?
If you're a homebuyer, you may be feeling the effects of higher mortgage rates and a decrease in home price growth. However, it's important to remember that even with these changes, homeownership is still within reach for many people. Here are some tips for navigating the current market:
Start by getting pre-approved for a mortgage. This will give you a better idea of how much you can afford and show sellers that you're serious about buying.
Consider expanding your search area. If you're priced out of your desired neighborhood, looking in nearby areas may yield more affordable options.
Be prepared to act quickly. With low inventory, homes are selling faster than ever. Work with a real estate agent who can help you stay on top of new listings and make a competitive offer.
What Does This Mean for Homesellers?
If you're a homeseller, you may be wondering how the slowdown in home price growth will affect you. The good news is that even with a decrease in the rate of growth, home prices are still higher than they were a year ago. Here are some tips for selling your home in the current market:
Work with a real estate agent who has experience selling homes in your area. They can help you price your home competitively and market it to potential buyers.
Be prepared to make repairs and updates. With more homes on the market, buyers have more options to choose from. Making your home stand out with fresh paint, updated landscaping, and minor repairs can make a big difference.
Consider offering incentives, such as a home warranty or covering closing costs. This can make your home more attractive to buyers and help you close the sale faster.
The Bottom Line
While the housing market may be experiencing some "short-term pain," it's important to remember that these changes are part of a natural cycle. Mortgage rates and home price growth will likely fluctuate over time, but homeownership remains a valuable long-term investment. By working with a trusted real estate agent and staying informed about market trends, you can make the most of the current market conditions and achieve your homeownership goals.
FAQs
Will mortgage rates continue to rise?
It's possible that mortgage rates will continue to rise, but the rate of increase may slow down. Factors such as inflation and the Federal Reserve's actions will play a role in determining future rate changes.
Is it still a good time to buy a home?
Yes, despite the current market conditions, homeownership is still a valuable investment for many people. By working with a real estate agent and staying informed about market trends, you can find a home that fits your budget and meets your needs.
Will home prices continue to increase?
While the rate of home price growth is expected to slow down, prices are still higher than they were a year ago. However, the rate of increase may vary depending on the location and condition of the housing market.
Should I wait to sell my home?
If you're considering selling your home, it's important to work with a real estate agent who can help you determine the best time to sell. While the current market may be experiencing some fluctuations, there are still buyers looking for homes.
How can I make my home more attractive to buyers?
Making repairs, updating landscaping, and staging your home can make a big difference in attracting buyers. Working with a real estate agent can also help you determine which updates and improvements will yield the best results.
Data Points
The average 30-year fixed mortgage rate hit a high of 3.18% in April 2021.
Home prices are still higher than they were a year ago, but the rate of growth has slowed down.
The pandemic has caused a shift in remote work, leading to increased demand for homes in suburban areas.
Supply chain disruptions and labor shortages have made it difficult for builders to keep up with demand.
The Federal Reserve is considering tapering its purchases of government bonds and mortgage-backed securities, which could lead to an increase in long-term interest rates.
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