The global housing market has been through quite the rollercoaster lately, and everyone from first-time homebuyers to seasoned investors is trying to get their bearings. With changing interest rates, fluctuated supply and demand, and ominous economic conditions, it’s no wonder many people are asking: what’s next for housing? Let’s take a stroll through the trends shaping today’s housing market and what they could mean for the future.
Starting off, the U.S. housing market saw average long-term mortgage rates inch down for five consecutive weeks, according to mortgage giant Freddie Mac. This is promising news for potential buyers who might have been sidelined due to rising costs. The benchmark 30-year mortgage rate dropped slightly from 6.28% to 6.27%, still noticeably higher than the previous year’s rate of 5%. At one point, these rates soared to as high as 7.08%—a level not seen in two decades! That hike turned what was once a booming market stale as existing home sales fell by 17.8% from 2021 to 2022, marking the weakest year for home sales since 2014.
Despite the current decrease, it’s important to note the context. Inflation has been sky-high, forcing the Federal Reserve to raise interest rates multiple times, which has driven borrowing costs up significantly. A rise of just half a percent can mean hundreds of dollars more added to monthly payments, leaving some would-be homeowners feeling hopeless. Just this past year, there were stretches of 12 straight months of declining home sales, leaving buyers and sellers alike scratching their heads.
Home prices also tell quite the tale. After more than a decade of consistent increases, the national median home price actually slipped by 0.2% this past February to $363,000—marking the first annual decline since 2010. So what's causing this? Low inventory, cooling demand, and rising interest rates all played significant parts.
Over on the other side of the globe, Singapore’s housing market is experiencing its unique phase as well. While at the beginning of 2023, the demand for private and public housing appeared to be red-hot, by mid-year, sales activity slowed down considerably. Similar trends were evident across both private and public sectors of Singapore’s property market, thanks to government cooling measures and market uncertainty. Looks like the days of skyrocketing apartment prices may be coming to a halt.
Given recent economic conditions, including high-interest rates and recognized pressures from soaring inflation, home seekers are understandably on edge. New government policies such as increases to Buyer’s Stamp Duty and Additional Buyer’s Stamp Duty were introduced to shift some demand and cool down the market. These measures saw property prices stabilize, but they also resulted in fewer transactions, particularly for foreign investors who now face much steeper duties.
Meanwhile, there's still interest, especially for premium properties. The number of million-dollar HDB flat transactions persisted, with 470 such sales accomplished during 2023, which is quite the achievement compared to 369 the previous year. Many sellers appear to hold fast on their asking prices, perhaps reluctant to part with their properties amid fears of lower future valuations.
On the rental market, signs of stabilization are present too. After seeing high rental rates earlier this year, tenants are beginning to find options as 20,000 new units are set to hit the market. It’s the first signs of relief for those who have been grappling with steep rates. With new developments, renters now have more choices, leading to expectations of rental prices cooling off.
Looking to the future, the global housing market will likely remain complex and unpredictable. For both buyers and sellers, it’s critical to stay updated on mortgage rates, interest fluctuations, and overall economic indicators. While increased inventory could impact prices positively for buyers, it's also conceivable we could see another spike if inflation proves persistent or if the economy takes unexpected turns.
So, whether you're eyeing a cozy home or contemplating selling, keep these trends close to your chest. The housing market is fidgety, and those who educate themselves on the current climate could turn uncertainty to their advantage.
