Mortgage rates hit above 7% by the end of October, the highest since 2002. Such high mortgage rates can deter new homebuyers, adding significant long term costs that many potential buyers would rather avoid. Sellers are forced to come down on home prices if they want to attract buyers. As a result, home prices experienced their first monthly drop from June to July, breaking a decade-long streak of rising home prices. The last time average home prices fell was in March of 2012.
Unfortunately for would-be homebuyers, home prices remain significantly elevated, having exploded 43% since before the pandemic, keeping homeownership out of reach for many. High mortgage rates are expected to persist for some time which may help drive down home prices. On the other hand, the same high mortgage rates will also continue to deter buyers as they end up adding tens to hundreds of thousands of dollars to home prices in the long run.
Currently, 66% of Americans are homeowners, up from 63% in 2016, but down from their high of 70% in 2004. Extrapolating from economic trends, it is likely that continuing high interest rates and fear of recession will pull down that number in the coming years.