Skip to main content. Skip to contact links. Skip to navigation. Skip to search. Skip to footer navigation.
Robbie Holtzman Headshot

Robbie Holtzman Loan Officer

NMLS ID: 343211

Rates hit 5% on average as homebuyers wrestle with prices

By: Movement Staff
April 15, 2022

For anyone making their first foray into the housing market in 2022, we get it. This is extremely hard. What's happening in the economy right now is complicated and likely will not be alleviated for quite some time. Let's dive into that in just a minute. First, we want to throw out some positive numbers that could help you feel a little better about a home search in 2022. surveyed 3,000 consumers earlier this year and 64% of respondents said they plan to list their home in the next 6 months. That would be a huge relief to the massive inventory issue facing the housing industry right now. The latest data from the National Association of Realtors shows there is just a 1.7 month supply of existing homes on the market. That means at the current pace it would take less than 2 months to deplete the entire inventory of existing homes if no more were listed.

However, while that sentiment from the survey is nice, it won't remedy all the issues facing homebuyers. The folks listing their homes will likely still benefit from high demand and home prices are expected to remain high with sellers having the upper hand.

Rates hit 5% on average as homebuyers wrestle with prices

The price issue is being felt with new homes as well. The Commerce Department notes that there is a 6 month supply of new homes, but no new homes sold in February came in under $200,000. That price point can essentially wipe out many first-time homebuyers. 

The hardest number to see is likely the interest rate you're going to be quoted. Freddie Mac's latest survey shows we've finally hit 5% on average for a 30-year fixed-rate mortgage. We saw that briefly in 2018 but you'd have to go back to 2011 to see it regularly week-over-week. Freddie Mac's economists put it very plainly saying, "As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation."

The United States' economic situation is not providing much help when it comes to lowering the prices of homes and pretty much everything else you consume. The Consumer Price Index (CPI) for March came in at a whopping 8.5%—the highest year-over-year increase since 1981. The Producer Price Index (PPI) showed an 11.2% year-over-year increase. Both of these data points are used by the Federal Reserve to gauge inflation and strategize monetary policy.

The Fed is expected to raise the federal funds rate by a half point at its meeting next month. The Federal Open Market Committee members are also expected to further reduce the Fed's balance sheet by selling off bonds. That is the Fed's way of reducing the amount of money in circulation which in theory reduces spending, driving down demand and forcing a lowering of prices. There's a reason we have an economic cliche saying, "The cure for high prices is high prices."

Author: Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.