Lower Mortgage Rates Won’t Make Homes More Affordable
The housing market is so tight, any relief on borrowing costs will just drive up prices, providing little help to buyers.
We need more of these.
Photographer: Nathan Howard/Bloomberg
Homebuyers can't catch a break. Sharply higher mortgage rates made houses more expensive and weakened demand without doing much to lower prices in most of the US. The supply of existing homes shrunk as owners hung on to their low-rate mortgages, slowing turnover and worsening the supply crunch. Now as homebuilders whittle down their inventories, they’re getting ready to phase out the buyer incentives they’ve been offering to counter higher mortgage rates.
Buyers have been holding out hope that they’ll eventually get some relief when mortgage rates start to fall. Sorry, but nope. What homebuyers need is more supply — without that, lower mortgage rates will just create more demand and push up prices for whatever homes are available. The affordability equation won’t change much.