As the economy continues to strengthen, there is a possibility of mortgage rates dropping to the range of 4%, which could attract buyers back into the market.
The recent months have witnessed a calming inflation rate, leading to a decline in mortgage rates during the holiday season. Although consumer prices still exceed the usual 2% inflation rate, November’s rate of 7.1% marked the lowest point in 2022. The deceleration of inflation is the primary factor behind the prediction of a 5.5% mortgage rate by the second half of 2023. If the deceleration accelerates beyond expectations, there is a possibility of mortgage rates reaching the 4% range, which would attract buyers back to the market.
The ongoing decrease in inflation can be attributed to the rent paid by individuals and the equivalent rent that owners would have paid. These measures continue to increase at a rapid pace, with annual gains of 7.9% and 7.1% respectively, marking their highest rise since the early 1980s. These significant gains are a direct result of the housing shortage and historically low rental vacancy rates. However, recent data suggests that the housing shortage is not as severe as previously believed. The rental vacancy rate increased to 6% in the third quarter of 2022, up from 5.8% the previous year, and overall sale inventory has risen by 2.7% in December. Additionally, data on new lease rates from apartment property managers indicate a noticeable slowdown in growth.
Furthermore, the construction of multifamily housing, primarily apartments, reached 550,000 units in 2022, the highest in almost four decades. This will inevitably lead to a further increase in apartment vacancy rates and a slowdown in rent growth. As a result, consumer prices will continue to stabilize even more.
In addition, NAR has advocated for converting vacant commercial space (empty shopping malls or office buildings, for example) into residential units through funding and/or tax credit incentives. Financial incentives to rehab dilapidated, abandoned homes in some major cities will also help bring about more housing supply and greater neighborhood safety.
As to the economy, there could be a recession—or maybe not. GDP is sliding along the near-zero growth line, but strong job creation is a bright spot. Despite layoffs in some industries, overall job openings still exceed the number of unemployed by a 7-to-1 ratio. Net job creation will be around 1 million to 2 million this year. The people who take those jobs are future homeowners.
The ongoing decrease in inflation can be attributed to the rent paid by individuals and the equivalent rent that owners would have paid. These measures continue to increase at a rapid pace, with annual gains of 7.9% and 7.1% respectively, marking their highest rise since the early 1980s. These significant gains are a direct result of the housing shortage and historically low rental vacancy rates. However, recent data suggests that the housing shortage is not as severe as previously believed. The rental vacancy rate increased to 6% in the third quarter of 2022, up from 5.8% the previous year, and overall sale inventory has risen by 2.7% in December. Additionally, data on new lease rates from apartment property managers indicate a noticeable slowdown in growth.
Furthermore, the construction of multifamily housing, primarily apartments, reached 550,000 units in 2022, the highest in almost four decades. This will inevitably lead to a further increase in apartment vacancy rates and a slowdown in rent growth. As a result, consumer prices will continue to stabilize even more.
The ongoing decline in inflation can be attributed to the rental payments made by individuals and the equivalent rent that property owners would have paid. These measures are still increasing rapidly, with annual gains of 7.9% and 7.1% respectively, marking their highest increase since the early 1980s. These significant increases are directly linked to the shortage of housing and historically low rates of vacant rental properties. However, recent data suggests that the housing shortage is not as severe as previously thought. The vacancy rate for rental properties increased to 6% in the third quarter of 2022, up from 5.8% the previous year, and the overall inventory of properties available for sale has risen by 2.7% in December. Additionally, data on new lease rates from property managers of apartment complexes indicate a noticeable slowdown in growth.
Moreover, the construction of multifamily housing, primarily apartments, has reached 550,000 units in 2022, the highest number in nearly four decades. This will inevitably lead to a further increase in vacancy rates for apartments and a slowdown in rent growth. Consequently, consumer prices will continue to stabilize even further.
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