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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The fate of the housing boom is on the minds of both homeowners and homebuyers these days. Will record home values lead to a crash reminiscent of the one that made the so painful? Or will prices simply take a breather from their torrid ? The housing market needs to get back into a balance between supply and demand. — Jerome Powell No one knows — not even the world’s most powerful central banker. During the news conference following November’s meeting of the Federal Reserve Open Markets Committee, Fed Chairman Jerome Powell acknowledged an imbalance in the housing market. Mortgage rates have gone from 3 percent in August 2021 to north of 7 percent now, according to . “Housing is significantly affected by these higher rates, which are really back where they were before the global financial crisis,” Powell said during the news conference. “The housing market was very overheated for a couple of years after the pandemic, as demand increased and rates were low. The market needs to get back into a balance between supply and demand.” What it means for home prices
Housing , at least not nationally. After all, housing inventory is still very low — that’s the supply part. And while a jump in mortgage rates has dampened the demand part somewhat, demand does still outpace supply, thanks to a combination of little new construction and strong household formation by large numbers of millennials. The National Association of Realtors said in October that , while prices continued to rise. The median price of homes sold nationally is now $384,800, which is up 8.4 percent from a year ago. (But it’s still below the all-time high of $413,800 set in June.) Powell Buyers need correction
The sharp rise in home prices over the past two years has made affordability a major challenge, particularly for of homes. Unlike repeat buyers, first-time buyers haven’t built an equity cushion as prices have soared since 2020. “For the longer term, what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again,” Powell said after September’s Fed meeting. “We in the housing market probably have to go through a correction to get back to that place.” While the Fed doesn’t directly control mortgage rates or housing prices, it does set the federal funds rate, a number that reflects both economic reality and attempts to guide economic activity toward sustainable levels of growth. The Fed slashed rates to zero at the start of the coronavirus pandemic. But as inflation accelerated to 40-year highs, the Fed has responded by raising rates multiple times in 2022 — including . What you can do
How homebuyers can cope with the still-challenging market: Shop around for a mortgage. Rates and fees vary significantly from one lender to the next. Comparing at least three offers from can save you thousands of dollars over the life of the mortgage. Look for a low down payment loan. For borrowers struggling to afford a home, the monthly payment is just one hurdle. Another is coming up with a . With the typical U.S. home selling for about $400,000, coming up with 10 percent down means writing a check for $40,000. There is a potential workaround, though, in the form of mortgages backed by the Federal Housing Administration and the U.S. Department of Veterans Affairs. Both and impose less onerous restrictions than conventional loans. While the standard down payment is 20 percent, VA loans require nothing down, and FHA loans have a minimum of 3.5 percent down. Consider a fixer-upper. For buyers frustrated by the lack of inventory and rocketing prices, older homes can be a good compromise. In Bankrate’s survey earlier this year, 21 percent of respondents said they would try this tactic. Of course, buying a fixer-upper means you’re taking on a project, one that brings uncertainty. No matter how careful you are about estimating your renovation budget, you can count on surprises — especially in a time when materials costs are volatile and construction labor is in short supply. Renovation experts say you should anticipate cost overruns in the range of 15 percent to 20 percent of your construction budget. Move to a more affordable area. Many buyers are facing the harsh reality that they can’t afford to buy in the neighborhood they really want. In some cases, buyers are deciding to move out of the most challenging markets. Home prices have been soaring everywhere, but prices are especially eye-popping in California. The median price of an existing home sold in Silicon Valley during the first quarter of 2022 was $1.88 million, according to the National Association of Realtors. In San Francisco, the typical price was $1.38 million, and in Orange County, $1.26 million. However, a number of major metro areas boast home prices that are still affordable. They include Buffalo (median sale price of $202,300 in the first quarter), Philadelphia ($297,900), Louisville ($235,400), St. Louis ($216,700), Kansas City ($287,400) and Milwaukee ($298,800). SHARE: Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. Michele Petry is a senior editor for Bankrate, leading the site’s real estate content. Related Articles