We are expecting to see several events occur to change the housing market in Oxford. Here is our outlook for 2022.

What is driving the housing market in Oxford? Hint: it’s more than just the latest mortgage rates.

Let’s look back

First, we need to begin in 2020. In March 2020, interest rate reduction allowed people to lower their respective payments through refi programs while also allowing people to borrow more money. The shutdown created less homes on the market due to supply chain bottlenecks, rising costs, and labor shortages. The small number of homes on the market were bid up to higher and higher sales prices.

Fast forward to today. Mortgage rates are now nearing 4% for the first time since 2019.

Fannie Mae is saying that these rates will become the new normal and may even increase throughout the year. Interest rates directly affect home affordability.

Take for instance a $300,000 home. If a buyer puts 20% down and locks in a 30-year mortgage, monthly payments are just over $1145/month. But just last year, you could get a 2.875% fixed loan for 30 years, which would be only $995/month!

Therefore, should the mortgage rate increases suggest that home prices will decline? Unlikely.

What does this mean for the housing market in Oxford?

In a stable housing market like Oxford, it is possible that home prices will continue to move higher. Why does would this happen? Typically, increasing mortgage rates occur due to an improving economy or rising inflation expectations.

Yale economist Robert Shiller, creator of the S&P/Case-Shiller Index, was quoted as saying: “There is not a tight fit at all between the two: high mortgage rates do not translate automatically into low home prices.”

Also consider the homeowner. As mortgage rates increase, the homeowner will become less likely to sell, especially if they have a fixed rate mortgage. This helps stabilize home prices by limiting the housing supply.

More factors are at play than mortgage rates alone. The affordability of a home will always depend on a combination of these factors: housing supply, economy, lending, and population growth.