Rising rates may not normalize the housing market, but they may help inflation
Quick Take:
Record high home prices aren’t going away, even with rising rates. However, the rising rate environment will prevent a significant amount of money from entering the economy.
With nearly full employment, the Fed is hyper-focused on price stability — the other half of the Fed’s dual mandate — which means higher mortgage rates through the rest of the year.
Demand is softening slightly now that the average mortgage rate jumped 2% in the past four months.
The Local Lowdown
Quick Take:
Home prices in Greater Sacramento reached record highs in April in terms of price per square foot; short-term demand boomed as buyers tried to lock in lower mortgage rates.
The second quarter of 2022 will indicate whether the market is moving toward or away from normalization. April data show that the number of new listings decreased slightly, signaling potential supply issues in the spring and summer seasons.
Despite some softening of demand as rates increase, low housing supply will continue to drive prices up unless an unexpected number of new listings come to market.
