Recent and future interest rate hikes announced by the Federal Reserve (Fed) have raised the specter of a possible housing crisis in the United States which, according to experts, it won’t happen any time soon, as prices will continue to rise due to the lack of existing housing.
Therefore, experts estimate, despite the fact that it increases rates it will cool the housing market of the world’s leading economy and it is expected that the number of operations will decrease in the coming months, prices will not decrease sensationally, as happened in the 2007-2008 crisis.
“With the new interest rates there will be fewer buyers and prices will soften, but they will not collapse“says Dowell Myers, professor of politics, planning and demographics at the University of Southern California.
The current situation, adds the expert, as well as all the sources consulted by EFE, “it has nothing to do” with what was experienced in the 2007-08 subprime mortgage crisiswhich led to a mass foreclosure of those who could not afford them and a precipitous drop in prices.
On September 21, the Federal Reserve (Fed) announced a new rate hike of 0.75 points, the fifth from Marchand with it the official interest rate has moved in a range between 3 and 3.25%, the highest level in the last 14 years.
In addition, Fed Chairman Gerome Powell confirmed that the upward trend it will continue in the coming months until the inflation control target was reached, which in August stood at 8.3%.
these climbs they are having a real reflection in indicators such as mortgage rates. According to data from the research division of the San Luis Federal Reserve, mortgages a thirty-year fixed rate are being sold this week average of 6.7%.a much higher figure than at the beginning of the year, 3.22%.
Variable interest rates, which are the most sensitive to Fed decisions and those that most affect the population (the monthly rate rises or falls based on this data) increased from 2.41% at the beginning of the year to the current 5.30%.
A new real estate crisis?
Given this situation, Americans will be able to cope with these increases or is a new crisis in the real estate sector which will lead to a drop in price?
According to Myers, even if the market will suffer, it is unlikely that a major crisis will come because after what we experienced fifteen years ago, “all kinds of protections have been implemented in financial instruments, loans are more sustainable over time” and they continue to exist ” enough buyers who can afford to buy. “
For his part, Business Institute professor at the University of Ohio, Itzhak Ben-David, explained that the increase in interest rates “will affect property prices” but above all it will cause “a drop in transactions”.
“It is very difficult to predict the impact what will happen There may be a slight slowdown, but it is difficult to predict and the situation can change at any moment, “he acknowledged.
A spokesperson for Compass real estate, one of the largest in the country, recalls a recent speech that the chief economist of the National Association of Realtors (NAR), Lawrence Yun, gave to the agents of the company.
Worried about the possible drop in sales, Yun reassured them: Potential homebuyers who expect a significant drop in home prices before entering the market should think twice. Neither prices will go down or stop rising.
Current NAR forecasts estimate that 2022 will close with und 10% increase and 2023 with 1%. In August, the median home price increased 7% year-over-year to $ 389,500.
According to Yun, though in certain areas yes there may be stronger settings there are many reasons why Prices are unlikely to drop in the near term. The main one, there are not enough houses to meet the demand.
Buy a house in the United States
Buying a home in the US, says a recent buyer, is a show jumping competition where speed is not the only thing that matters.
A buyer must demonstrate financial strength, have as much money as possible for entry, an unblemished credit history and be willing to bid, because many times the final sale price exceeds the starting price.
“The current high prices are related to the strong demand for housing“Ben-David says, echoing Myers:” What’s crazy is housing shortagethere are too many people for too few houses “.
While in 2007 what was there was a surplus of housesnow what’s up “a surplus of thirty-year-olds that they are possible buyers “and that did not do so in the years of the pandemic.
“The pandemic has synchronized the behavior of thousands of millennials who jumped at the same time. When that happens, the impact on the real estate market is huge,” he explains.
All this in the midst of a crisis of lack of materials and shortage of manpower, aggravated by the pandemic, the lack of land and also by bureaucracy, with citizens increasingly reluctant to suffer the hardships of the works.
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Source: Clarin
