Mortgage rates rise slightly, but experts say recession unlikely
(NewsNation) – Average long-term U.S. mortgage rates rose again this week, with interest at their highest level since 2009. The 30-year rate climbed to 5.3% from 5.27% last week. last week, when at this time last year it was almost 3%.
No one wants to see this end in a recession like 2008, but there are two main reasons why a similar crash is unlikely, even if housing costs continue to rise.
Jamie Matzdorff, a realtor with Keller-Williams Realty in Boise, Idaho, predicts home prices will stabilize over the next few years.
While no price drop in the near future is bad news for buyers, those who already own property are reaping the benefits. The typical American homeowner earned a record net worth of $50,200 last year.
Some places are more expensive to live than others. Boise tops the list of cities overvalued by more than 50%, according to Moody’s Analytics, followed by Sherman-Denison, Texas, and Muskegon, Michigan.
Many of these overpriced places offer breathtaking scenery. Matzdorff, of Boise, said having four full seasons helps sell Idaho’s Treasure Valley region. Changing lifestyles and attitudes stemming from the pandemic sealed the deal.
“COVID has increased the rapid rate of being able to work from home and live where you want to live while you work from home,” Matzdorff said.
But average homebuyers must compete with big corporations and rental agencies to secure property in these sought-after locations.
Interest rates are also going up, which can be a hurdle for many buyers – although Matzdorff insists they still get a deal, saying: “6% is still a phenomenal rate. It’s just not 3%.
That 3% rate had been “luck of the draw,” Matzdorff said.
“(It was) like winning the lottery for three years,” she said. “The economy can’t support that.”
For those with an eye for trends, this is all too reminiscent of what the markets looked like in 2007, just before a massive real estate crash and recession. Is this bubble also about to burst?
Matzdorff and others predict that will not be the case now, for two main reasons. The new federal rules have changed home loans in a positive way, so more people are likely to repay their loans rather than default. And the United States is in the midst of a massive housing shortage.
Mortgage giant Freddie Mac estimates that the country is short of about 4 million homes.
Given that the pace of housing construction was slowed by the bursting of the last housing bubble – and further constrained by the pandemic – it will take time for supply to catch up with demand. In the meantime, for those looking to move to a place like Boise, Matzdorff has some good news.
“I predict, and what we see is that things will continue to plateau, at least in this market, because we’re still an extremely desirable place to be,” she said.