Conor Sen writes in Bloomberg that With the labor market still delivering raises to workers, people will be able to better handle higher mortgage rates, buying time for the home industry to find a balance…(Bloomberg)
An improvement in buyer psychology is helpful, but what’s really needed is improved affordability, and the question is how we get that. Meaningfully lower mortgage rates don’t seem to be on the table right now given the Fed’s policy stance. And while home prices have declined in some markets, emerging trends in the data suggest that sellers would rather hold onto their homes for now than cut prices a lot from these levels, which has led to new listings declining after a meaningful rise this spring and early summer.
That leaves rising incomes as the best hope for the housing market right now. The July personal income data released last week showed that wages and salaries grew 0.8% in July, or 10% on a year-over-year basis, as job and wage growth both remain strong. Presumably this will slow in the months to come as rising interest rates cool the labor market along with the economy. But that will take some time, and the wage growth that will have occurred between the first half of 2022 and the first half of 2023 will allow buyers to better handle higher mortgage rates next year even if home prices don’t fall.