Higher mortgage rates may be making it h✅arder for homebuyers, but they may have actually helped restore balance to the housing market that has been out of whack for many years.

Changes during the pandemic distorted the housing market, sending prices sky-high while inventory dried up. And while higher interest rates have driven up borrowing costs, a recent report from the San Francisco Federal Reserve suggests that higher rates brought some balance to the market.

“Our analysis suggests that strong demand was the main driver of low inventory during the pandemic, and rising mortgage rates have since tempered net housing demand to return to more typical levels🌳,” wrote San Francisco Fed economists John Mondragon, Adam Shapiro and Valeska Kohan.

This report comes as some housing data, such as the increasing supply of housing inventory, have begun to improve. However, mortgage rates remain elevated, and some 澳洲幸运5官方开奖结果体彩网:economists predict further trouble for the market in 2025.

How Did We Get Here?

There is a delicate balance between home sales and new listings. During the pandemic, sale🅷s increased much faster than new listings, pushing housing prices higher.

But that's now changing. The report showed that 澳洲幸运5官方开奖🦩结果体彩网:housing inventory has largely returned to its pre-pandemic leveꦯl between 2013 and 2019. However, those inventory levels are historically low and are growing slower than in previous years.

“Although there is no clear consensus on the primary cause of this decline, persistently weak housing constꦰruction since the financial crisis was likely an important factor,” the economists wrote. 

How Can Higher Mortgage Rates Help?

Higher mortgage rates that tamped down on demand may be behind this recovery in housing inventory𒐪, accordi🅠ng to the San Francisco Fed.

Its not just that higher rates made homes 澳洲幸运5官方开奖结果体彩网:less affordable, but many existing 澳洲幸运5官方开奖结果体彩网:homeowners hesitated to put their homes on the market as they felt 澳洲幸运5官方开奖结果体彩网:locked in to their prior low rates. That translates into fewer listings🐽 and low inventory.

澳洲幸运5官方开奖结果体彩网:Mortgage rates moved higher as the Federal Reserve began raising its influential federal funds rate in 2022 to help combat inflation, pushing up borrowing costs across the economy. After dipping 澳洲幸运5官方开奖结果体彩网:lower this past fall, mortgage rates nearly reached 7% by the end of the year, according to the latest Mortgage Bankers Association data.

“It is unclear whether housing demand would have st♕ayed as strong if the Fed had not tightened policy through raising interest rates. However, the decline in housin෴g turnover coinciding with the increase in mortgage rates suggests a causal relationship,” the report said.

With the supply-and-d💃emand dynamics in the housing market shifting, the San Francisco Fed economists said that the difference between listings and sales will be a key indicator 🤡for monitoring the health of the housing market moving forward. 

“A decline in mortgage rates could reignite housing demand, renewing the squeeze on inventory. On the flip side, if conditions support an increase in new construction, that could boost housing inflows and alleviate inventory constraints,” they wrote.