Hate To Burst Your Bubble, But No One Really Knows What 5% Mortgage Rates Will Mean For Real Estate
April 19, 2022 | Dees Stribling |Bisnow
In mid-April, average mortgage rates surpassed 5% for the first time in about a decade — and they are expected to increase further as the Federal Reserve increases interest rates this year in an effort to put a lid on inflation.
Higher rates will cut into demand for housing, experts agree, but there is less agreement on whether that means a hard landing for the housing market — a 2008-style bubble pop, that is — or merely some cooling of the market’s recent fever pitch.
“Interest rates are going to pull back some of the essentially unserved demand that builders were turning away because of their own supply chain issues,” National Association of Home Builders Chief Economist Robert Dietz said.
If that were the case, a drop in demand might represent a relatively soft landing, since homebuilders haven’t been able to keep up with demand anyway.
That isn’t for want of trying. The residential industry, both for sale and rent, is in overdrive.
Despite the onset of the pandemic, single-family starts were over a million in all of 2020 for the first time since 2007, and continued at that pace in 2021, with 1.1 million starts. Multifamily starts were over 389,000 units in 2020, approaching a level not seen in about 30 years, and in 2021, the number of starts was more than 460,000.
