That’s how little home prices may grow over the next year, if a bold new forecast is correct—a steep downturn from the double-digit annual increases of recent months.
Mortgage rates are getting further and further away from the near-record lows that have boosted homebuyers’ purchasing power and helped turbocharge the housing market, and real estate company Redfin, which released its housing market predictions Thursday, says further increases in interest rates next year will help put the brakes on runaway price increases.
By way of comparison, the median home price of $358,125 as of late October was 13% more than a year earlier, according to Redfin’s four-week moving average—and in May it was a record 24% higher. A 3% annual increase by the end of next year would also be less than half of what forecasters at mortgage giants Fannie Mae and Freddie Mac are predicting for 2022 (7.9% and 7% respectively.)
“This low price growth will likely discourage speculators from entering the market and allow more first-time buyers to have a chance at winning a home,” Daryl Fairweather, chief economist at Redfin, said in a report.
Redfin expects 30-year-fixed mortgage rates to rise to around 3.6% from around 3% by the end of 2022, thanks to the pandemic subsiding and lingering inflation, she said.
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