Have house prices fallen? Will mortgage rates rise? What to expect in the housing market in the fall

Buying a home has never been easier. However, over the past few years, the process has become truly herculean as buyers are pushed to emotional and financial limits. The sellers, on the other hand, were mostly able to sit back and enjoy the ride, which usually culminated in a huge payday.
The housing market has changed dramatically over the past few months. Higher mortgage rates thinned the pool of buyers, began to curb runaway home prices, and forced many sellers to return to the negotiating table. The changes are leading buyers and sellers to wonder who is on top these days.
So as real estate continues to cool along with the weather, what do we know about the housing market in the expected fall of this year?
"The housing market will continue to be in a period of adjustment as buyers and sellers try to figure out what to expect," says Realtor.com Chief Economist Danielle Hale. "The economy is at a turning point, and this will cause uncertainty among buyers and sellers. People are more worried about a recession than they were."
She predicts that buyers will have more opportunities and less competition this fall to purchase homes. There will be more homes for sale as many properties stay on the market longer. Buyers won't have to submit offers within hours of a home tour, and they'll be able to insist on inspections and other legitimate things. In many markets, they won't even have to offer more than the asking price - and may even be able to negotiate a lower price.
However, house prices and mortgage interest rates – the latter of which more than doubled in the past year – are expected to continue to rise, leaving buyers this fall with significantly higher monthly payments than they would have received earlier this year. And buyers shouldn't expect a large influx of homes to hit the market to provide any relief.
"The housing market in the fall will still be challenging for buyers and sellers," says Ellie Wolff, chief economist of Zonda Real Estate Consulting. "Buyers have more options than they had at the beginning of the year, but those looking for homes won't hear options."
It is likely that mortgage interest rates will continue to rise
The fate of the housing market this fall, and what ultimately happens to prices, will largely depend on mortgage interest rates. They are now the highest they have been since 2008 and more than double what they were just a year ago, according to Freddie Mac. Interest rates averaged 6.02% for 30-year fixed-rate loans in the week ended Sept. 15 — up from 2.86% a year earlier, according to Freddie Mac.
Mortgage rates are expected to continue to rise as the US Federal Reserve continues to raise interest rates to fight inflation. Mortgage rates usually follow a similar path.
Each additional percentage point can make the monthly mortgage payments significantly more expensive and add tens of thousands of dollars over the life of a 30-year loan. Today's buyers are paying about two-thirds more each month for the same home than they were a year ago, thanks to a punishing combination of higher rates and prices.
"The rates are not expected to decrease in the near term and may even increase," says Len Kiefer, Freddie Mac's Deputy Chief Economist.
The good news for buyers is rates vary widely based on the loan and lender as loan officers compete for business. This gives opportunities for savings.
"It may be beneficial for the borrower to consider shopping around," Kiefer says.
Have house prices fallen?
Those hoping for another housing bubble to pop - and apartment prices to fall - should not hold their breath.
Another crash doesn't seem likely. But while it still costs more to buy the same home today than it did a year ago, price growth is slowing as mortgage rates have risen. Higher mortgage rates mean buyers have less money to spend on homes, creating a sort of cap to keep prices in line with their budgets.
"Prices will drop a little more than was common seasonally," says Hale. "But they will still be higher than they were a year ago."
While home prices can actually fall, "the deck is stacked against" it happening, Hale says. There are not enough houses for sale for everyone who wants them. Rents are also rising, which makes the prospect of locking in a fixed mortgage payment particularly attractive.
Many real estate experts consider the days of endlessly soaring house prices to be over. Instead, they expect prices to flatten this year, and could even drop slightly in 2023. Buyers are already hitting the brakes in the hottest markets, where prices have risen the most at the fastest clip. (Think the Southwest and the Mountain West, such as Austin, Texas; Phoenix; and Boise, Idaho.)
"We are told that the house prices will drop a little. It's not a crash," says Wolf Mazunda. She expects prices to drop 5% to 10% nationally, although the drop will vary from market to market.
"Over the next two years, some of the most frothy markets may see price declines that may look more like a 20% drop," she adds.
Sellers have already started seriously lowering their prices, and builders are offering all kinds of incentives to entice buyers. About 19.4% of sellers had to lower their list prices in August - up from 11% a year earlier, according to Realtor.com data.
Now that the market has cooled, most sellers no longer receive 15 offers, all above asking price, half of them in cash with no strings attached within hours of their homes going on the market. Instead, the bidding wars died down as the number of buyers in the market decreased.
“If someone is trying to buy a renovated home in a great school district, the housing market is still extremely competitive. And you should still expect to go through a bidding war," says Wolff. "But if the house needs some work, is not in the best neighborhood or is priced high, then the buyers will not find a bidding war. They may be able to negotiate a price reduction or not give up incentives."
Don't expect a rush of homes to go up for sale
While buyers have more bargaining power than they've had in years, they shouldn't get their hopes up that there will be an influx of homes hitting the market this fall.
More "for sale" signs went up in the late spring and summer as sellers tried to cash in while they could. However, they have less incentive to list their properties now that the market has cooled and homes no longer go under contract within days.
"That big shift in inventory that helped move the market in a buyer-friendly direction has lost some momentum," Hale says. "We don't see many homeowners deciding to sell."
Of course, most sellers are also buyers - and it's a tough road for this group. So many sellers choose to stay put.
"It's harder to make that math work in transition because the costs are so much higher than they were," Hale says. "If you have to take out a new mortgage, it will obviously be much higher today."
Few homes and high costs mean fewer home sales in the future. Some potential buyers may prefer to wait to see if prices drop or the country enters a recession. Others are simply priced.
Home mortgage applications fell 28.6% year over year in the week ended Sept. 9, according to the Mortgage Bankers Association. This lack of buyers will help tip the pendulum in their favor.
"In the fall, we will see the return of the buyer's market in several areas across the country. In other markets, it's still more buyer-friendly," according to Zonda. "You don't have to make an offer the day the house is listed. You do not have to bid above the asking price. And you don't have to give up your eldest child."