Americans planning on buying a home in the next two years could be expecting mortgage rates and home prices to fall. However, experts say buyers could be in for a disappointment.
Mortgage rates hit a high of 8% in October last year, marking the highest level recorded in over two decades. This was driven by the inflation rate and the Federal Reserve's move to hike their benchmark rate in hopes of curbing inflation.
The contract rates for mortgages have fallen since then, dipping as low as 6% in September. However, the rates have since crept up again. In the week ending Nov. 21, the contract rate for a standard, 30-year mortgage was 6.84%, increasing by 0.06% from the week before. The 15-year rate also crept up to 6.02%, which is 0.03% higher than the previous week, according to Freddie Mac's Primary Mortgage Market Survey.
Read more: NYC Landlords Now Banned From Forcing Tenants To Pay Thousands of Dollars in Real Estate Broker Fees
What Do Experts Forecast in the Next Two Years?
Despite efforts to lower mortgage rates, experts believe rates would stay stuck above 6% at least until 2027.
"The new normal will be around 6%," Lawrence Yun, chief economist at the National Association of Realtors (NAR), said, as quoted by CNN. "We are not going to return to 3%, 4%, or 5% mortgage-rate conditions."
It is important to note that many factors are driving up mortgage rates. The recent increase is actually caused by strong economic data---specifically employment and retail spending. This could prevent the Fed from making cuts.
How About Home Prices?
Apart from mortgage rates, high home prices also pushed many buyers out of the housing market this year. Unfortunately, experts predict home prices will only continue climbing next year due to a shortage of houses for sale and "pent-up demand," per CBS News.
The NAR also recently released a forecast of median home prices. The forecast said the 2025 median home price would likely be $410,700, up 2% from this year. It would further increase to $420,000 in 2026, up 2% from 2025.
That said, it was noted that home prices could fall in some places where remote workers will sell their vacation or retirement homes.
