DENVER — Housing prices have gone up by more than 20% across the country since the start of the pandemic. To combat the hot housing market, the Federal Reserve raised interest rates.
The half percent interest rate hike is the largest hike in more than 2 decades, and more increases are expected in the next several months. It's an effort to slow down inflation, but these rate hikes make it more expensive to make big purchases—like buying a car or a home.
The National Association of Realtors expects home sales to drop 9% during 2022 compared to 2021 because of rising interest rates.
Even if that happens, average prices are projected to be about 5% higher than they were in 2019, before the pandemic. That's mainly because there still isn't enough housing inventory nationwide.
Housing experts at Rocket Mortgage say rising interest rates could make the inventory problem even worse and stop people from putting their homes up for sale.
Existing homeowners are likely locked in for a lower interest rate, so many may try and wait to sell until interest rates go down again, but that will likely be next year at the earliest.
The average 30-year-fixed home loan rate is now 5.37%, up more than 2 percentage points since the year began, according to the Mortgage Bankers Association.
Buyers of an average existing home that sold for $375,000, will pay $440 more each month now than they would have in December, and that's with 20% down and a fixed rate for a 30-year term.
Economists say the fed will likely carry out another half-point rate hike at its next meeting in June and possibly again in July. They predict by the end of this year, interest rates could be up by 3% from where they are now.