Bank of America CEO Issues Dire Warning for Housing Market: Prepare for 2 More Years of Pain – The Motley Fool
That’s really not news home buyers want to hear.
- Home prices are up right now and mortgage rates are soaring.
- Until things change, home buyers might continue to struggle.
It’s been a really tough go for prospective home buyers since mid-2020. For the past two years and change, the real estate market has sorely lacked inventory. That’s driven home prices upward and forced buyers into countless bidding wars.
This year, mortgage rates are also higher than they’ve been in decades, adding another layer of difficulty to an already hard situation. And unfortunately, it doesn’t look like housing market conditions are about to get more favorable for buyers anytime soon.
In a recent interview with CNN, Bank of America CEO Brian Moynihan said he’s concerned the housing market will continue to challenge buyers in the coming years. Moynihan pointed to sky-high mortgage rates as a big reason buyers might continue to struggle — especially first-time buyers with more limited financial resources.
Moynihan also said there could be two more years of pain in the housing market before things cool off and homes become more available and affordable. And that’s a tough pill to swallow.
But should today’s buyers give up on purchasing a home? Not necessarily.
Why homeownership may not be out of reach
Until housing inventory picks up to a notable degree, home prices are likely to remain high. And inventory may not increase a lot anytime soon. But that doesn’t mean you’re doomed as a buyer.
More: Check out our picks for the best mortgage lenders
We could see a modest uptick in real estate inventory in the coming year. And as mortgage rates present affordability issues for buyers, some might choose to exit the real estate market for the time being. If those things happen and there are fewer buyers to compete with, it could do the trick of bringing home prices down to more affordable levels so that even if borrowing rates remain high, homeownership is attainable.
It’s also important to remember that if you can afford a home based on today’s prices and borrowing rates, you can always sign a mortgage and then refinance it down the line, once rates are lower. Granted, that may not happen for a couple of years. But if you can swing a higher mortgage payment for a while, you’ll have a chance to get into a place of your own, build equity in it, and enjoy the different tax breaks homeowners get to benefit from.
It could pay to wait
If you’re in a strong position to buy a home, then you don’t necessarily need to sit out the market for the next two years. But if you’re not as confident about your ability to afford a home, then waiting a couple of years could make sense.
Buying a home is a huge undertaking, even when housing market conditions are far more buyer-friendly than they are today. And so if you’re iffy about the idea of committing to a home purchase and the ongoing mortgage payments and expenses that come with it, hold off.
It could take a couple more years for the housing market to settle. But if waiting things out means avoiding a huge financial strain, then it’s worth exercising patience.