Higher mortgage rates may be making it harder for homebuyers, but th🐲ey may have act🃏ually 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 inv♕entory 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开奖号码历史查询: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, sales increased much faster than new listing🐬s, pushing housing price🐎s higher.

But that's now changing. The report showed that 澳洲幸运5开奖♈🐭号码历史查询:housing inventory has largely returned to its pre-pandemic level between 2013 and 2019. However, those inventory levels are historically low and are growing slower than in previous♒ years.

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

How Can Higher Mortgage Rates Help?

Higher mortgage rate🔯s that tamped down on demand may be behind this recovery in housing inventory, according to the San Francisco Fed.

Its not just that higher rates made homes 澳洲幸运5开奖号码历史查询:less affordable, but many existing 澳洲幸运5开奖号码历史查询:homeowners hesitated to put their homes on the market as they felt 澳洲幸运5开奖号码历史查询:locked in to their prior low rates. That translates♒ into fewer listings and low inventory.

澳洲幸运5开奖号码历史查询: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开奖号码历史查询: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 stayed as strong if the Fed had not tightened policy through raising interest rates. However, the decline in housing t♍urnover coinciding with the increase in mortgage rates suggests a causal relation♚ship,” the report said.

With the supply-and-demand dynamics in the housing market shifting, the San Francisco Fed economists said that the difference between listings anඣd 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.