30-year mortgage rates are near 8% with excellent credit. Interest rates have climbed for the past three months straight. The Fed is considering another interest rate increase for November and December, possibly pushing rates up to 8.5% or even 9%. The reasoning is that higher interest rates will "slow down inflation".
Home sales are at a 13-year low. Factor in the higher cost of insurance and the fact that property taxes are going up to unaffordable levels and the very high cost of labor and materials for home construction... and you have a real estate market that's going to crater.
I personally know several homeowners that had their homes listed for sale, but have removed them from the market in the past 2 months. They will wait and hold on to what they have for now. One real estate agent mentioned to a couple that they should keep their house off the market until at least middle of next year and then decide based on market conditions.
I'm suggesting that the U.S. economy is a three legged stool... and one of those legs is housing and private & commercial real estate. If it fails, the economy goes into a deep recession at best.
Good question. I think inflation is the reason in This case. The way i ook at it, if a dollar is worth only 10 cents then you need 10 times as many to make the value of a dollar. A 350k house would perhaps only be 35k of a dollar was actually a dollar. I do think real estate agents push prices up too. Plus sellers whonwant to get as much as they can.
Houses gain value with time. Houses are priced primarily on dollars per square foot and then some for features and location. Inflation caused construction prices to go from $125 per square foot to over $200 per square foot. The more it costs for new construction the higher the value of existing homes. Location becomes a big factor as well. Once an area is completely built out prices rise since no new construction can occur in that desirable area.