News The Balance Today: News You Need To Know on Dec. 29, 2022 Rising Rates, Falling Home Affordability By Kristin Myers Published on December 29, 2022 Photo: Portra / Getty Images Looking Back on 2022 When the Federal Reserve aggressively raised interest rates to cool inflation this year, a wide range of loans we use to buy things like cars and homes also got more expensive. Higher rates also impacted anyone looking to sell a home, as the value of home equity for many homeowners decreased. Skyrocketing mortgage rates, which hit two-decade highs in November, have thrown cold water on a hot housing market that saw prices shoot up 42% since the pandemic’s onset as homes became less affordable to many prospective buyers. The decline in affordability has forced many would-be homebuyers out of the market, smothering sales and hurting prices. Some housing economists predict only a modest decrease in prices next year, while others see a crash coming. So what does this mean if you want to buy a house? There may be light at the end of the tunnel—at least when it comes to home prices. Depending on how high the Federal Reserve hikes rates to fight inflation, we could see higher mortgage rates send home prices even lower. If you can afford to wait, it could mean big savings. But if you’re waiting for home prices to fall to the same levels as before the pandemic, you might be waiting a while (and perhaps, even forever). Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Freddie Mac. "Mortgage Rates." PR Newswire. "Black Knight: May Sees Least Affordable Housing Market in 16 Years While Existing Mortgage Holders Gain Record $1.2 Trillion in Tappable Equity in Q1 2022." Wells Fargo. "The Housing Market Correction."