During the pandemic US home prices grew 40-50% in most major markets as people moved to suburbs and rural areas. One assessment found that a US household would have to spend 31% of its monthly income to make a mortgage payment for an average-priced home, the highest mortgage payment to income ratio since 2007.
As a result, home buying has slowed. Home builders have also slowed the pace of new construction, in part because of supply chain issues and in part because of pandemic related labor shortages.
Coupled with rising interest rates and existing home inventory being at all time lows, this means that prices may soon correct allowing more people to enter the property ladder.
This could actually be a good thing for first time home buyers and those on a budget. As the market corrects home prices above market value will likely lower and interest rates should go down. Moody’s predicts a 5% housing price drop nationwide and upwards of 20% in the most overvalued markets.
Rising interest rates have also likely led to faster sales as buyers move quickly to lock in better rates. Average listing age for homes nationwide is 14 days, a record low.