There’s no question that potential home buyers are stuck in a seemingly never-ending nightmare of trying to navigate their way through intense bidding wars over the few homes that are on the market. With record-high prices and record-low inventory, the American dream of owning a home is becoming increasingly difficult.

“Depleted, stretched, and disheartened. That’s how a lot of home shoppers, who’ve lost home bid after bid over the past year, are feeling these days,” Fortune wrote.

“When it comes to timing, they’ve certainly gotten the short end of the stick. Over the past 12 months, U.S. home prices are up 18.8%—an uptick larger than any 12-month period leading up to the 2008 housing crash,” Fortune continued.

Going forward, could the housing market actually get even worse? According to Zillow, the short answer is yes.

“Annual home value growth is likely to continue accelerating through the spring, peaking at 22% in May, before gradually slowing through February 2023,” the company’s researchers claimed.  

“Monthly home value growth is also expected to continue accelerating in coming months, rising to 1.8% in March and 2% in both April and May before slowing somewhat. … The robust long-term outlook is driven by our expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes,” Zillow’s report added.

Zillow said that by the end of February 2023, the typical U.S. home is expected to be worth nearly $400,000.

Monetary Policy Tightening

The company, though, did note that “downside risks to our forecast remain.”

“Continued elevated inflation heightens the risk of further monetary policy tightening, which would result in higher mortgage interest rates and weigh on housing demand,” Zillow added.

Per CNBC, the average rate on the popular thirty-year fixed mortgage hit 4.72 percent on Tuesday, which is 26 basis points higher than last Friday, according to Mortgage News Daily. This means that fast-climbing rates are pushing some home buyers to rush into the market before they get even more priced out. In addition, there is genuine concern that a more hawkish Federal Reserve could potentially drive those rates even higher, which would mean higher monthly payments that fewer buyers can afford.

“Rates have a small chance to top out before hitting 5% and a good chance of topping out before hitting 6%,” Matthew Graham, chief operating officer at Mortgage News Daily, told the business news outlet.

“It is a rapidly moving target in this environment, where we legitimately and unexpectedly find ourselves needing to be concerned with inflation for the first time since the 1980s,” he continued.

On Monday, Federal Reserve Chairman Jerome Powell reiterated that the Federal Open Market Committee would continue with rate hikes until inflation is contained.

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters