Although rising mortgage rates have dampened demand for housing, real estate experts expect home prices to keep rising locally and nationally.
That one-two punch might push more potential homebuyers to abandon their search, said Jim Jarrett, president of the Realtors Association of Metropolitan Pittsburgh and an associate broker for Berkshire Hathaway HomeServices The Preferred Realty. But he said buyers should consider accelerating their timeline.
“They think, ‘Oh, I'm going to wait. I'm either going to save money,’ which never works. Or they're going to wait till prices come down because they think they're insane right now, which they are,’” Jarrett said. “But when prices start to come down and interest rates go up, [homeowners] end up writing the same check every month, if not more.”
In the city of Pittsburgh and nearby suburbs, the typical home value has increased by 15% over the past year to $238,000, according to the real estate site Zillow. In the broader Pittsburgh metropolitan area, which includes all of Allegheny County and neighboring counties, the typical home value rose to $212,000 last month, a 14% increase compared to a year ago.
Nationally, the average 30-year fixed mortgage rate has nearly doubled in the past year and now exceeds 5%. While that rate is low by historical standards, it can add hundreds of dollars to the monthly cost of financing a home today.
“One of the only silver linings of the housing market in 2021 for homebuyers was that mortgage rates fell to record lows, and many people were able to get a 30-year loan with an annual interest rate under 3%,” Zillow senior economist Jeff Tucker said. “Those days are long gone now.”
Rather, he said, “Even if a substantial share of interested buyers walk away, [those] that are left could still be enough to sustain the market at current prices because there's so few homes available for sale.”
He noted that home construction still hasn’t bounced back since the Great Recession even though a large population of millennials, now in their thirties, has entered the housing market. At the same time, the rise of remote work during the pandemic has further supercharged homebuying.
Prices in the Pittsburgh area remain relatively low, however. Tucker said the region ranks as the second least expensive housing market among the 50 most populous metro areas in the country. Only Oklahoma City placed lower.
Local prices also have not risen as quickly as in other parts of the country. For example, in some Sun Belt metros between Arizona and North Carolina, home values exploded twice as quickly as Pittsburgh’s rate or faster, Tucker said.
“We are an extremely affordable place to live,” said Jarrett, who serves clients throughout southwestern Pennsylvania. “So you have people moving in from the West Coast, and you're showing them a half million dollar home, a three-quarter million dollar home, whatever it is. That home would be several million dollars from where they're coming from. So they're thinking, ‘Oh, this is great.’
“The problem is it's our own yinzers that we have here living in Pittsburgh that are [getting outbid]. Those are the people that I feel bad for.”
