Housing market won't come 'unstuck' until 2026, economists predict — here's why
How high did interest rates rise in 2022?
In 2022, interest rates in the US rose to 8%, the highest level since the early 1980s. This increase was driven by inflation, which led the Federal Reserve to raise its key interest rate to combat the rising cost of living.
What effect has increased rates had on home sales?
Increased rates have led to a decline in home sales as the "lock-in effect" deters homeowners from selling and young buyers struggle to enter the market. Bank of America predicts that home prices will rise by about 4.5% in 2024 and 5% in 2025, before falling back to 0.5% in 2026 due to the fleeting pandemic-driven market boost.
Why are most homeowners unwilling to move?
Most homeowners are unwilling to move due to the "lock-in effect" caused by a significant gap between current mortgage rates and the lower rates they locked in during the pandemic. Selling their homes would mean giving up these low mortgage rates, making it financially unattractive to move. This effect is expected to last for at least six to eight years, according to Bank of America economists.