The past few years have seen a boom in housing prices worldwide. The global pandemic brought more homebuyers out of the woodwork, while inflation drove prices up higher and higher. The result was a buying frenzy, with homes selling well above their asking price. But now, the global housing market is stuck in a strange state of limbo. Let’s look at why this is and what it could mean for the future.
No buyers, but also no sellers
Even though housing prices have come down since their peak, they are still well above their historical averages. At the same time, interest rates continue to climb higher and higher, bringing mortgage rates even higher. This combination of factors makes it hard for buyers and sellers alike.
Buyers, in search of lower monthly payments, are waiting until interest rates settle down to enter the market. Meanwhile, sellers who have locked in low interest rates from the past decade are unwilling to sell since they would then have to get a mortgage at a new, higher interest rate today.
The result? A housing market that is not seeing enough buyers and sellers for the market to progress forward. Unlike the United States, where there is ample space to build, it’s harder for homebuilders to pick up the slack in the market and build new homes due to a lack of space and a harder regulatory landscape. With few new homes being built, potential sellers pumping the breaks, and buyers waiting for lower mortgage rates, the housing market is in an unusual stalemate.
What should you think about it?
If you are a potential buyer:
Buying a home is a big decision, and you should always be prepared to make your mortgage payments. Make sure you can afford your mortgage, given the current interest rates and housing prices. Because interest rates and housing prices change daily, always stay up-to-date on the latest rates and info.
If you are a potential seller:
Understand that housing prices fluctuate not just because of interest rates, but also due to your location, time of year, and other factors. It’s hard to get the absolute best return on selling your home, so don’t try and time the market. Instead, sell when it makes sense for your situation.
Be on the lookout for
- Interest rates – If interest rates continue to rise, so too will mortgage rates.
- Wage growth – People are more likely to buy homes if their wages increase, creating a hotter housing market.
- Local prices – Home prices vary greatly depending on where you live or want to move.
