I’m the chief economist for a $5 billion real estate title and data company. Here are 5 things you need to know about the real estate market right now.

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Housing has become increasingly unaffordable for millions of Americans, and home prices and mortgage rates continue to rise (see the lowest rates you may qualify for now here). So as part of our Serie where we asked leading economists and real estate professionals for their thoughts on the housing market right now, we spoke with Mark Fleming. Fleming, the chief economist at First American Financial Corporation, a securities, deals, real estate data and risk solutions company, has analyzed and forecast the real estate and mortgage markets for 20 years. Before becoming First American’s Chief Economist, Fleming developed insights and analytical products for CoreLogic, as well as valuation models at Fannie Mae, and today his research experience includes housing and urban economics and mortgage risk. So we asked Fleming: What do today’s buyers and sellers need to know about the real estate market?

Mortgage rates are higher, but still not high

Although they are significantly higher than three months ago, which reduces the purchasing power of the house, they are around 6% for a 30-year fixed-rate mortgage, which, according to Fleming, is far from high. “Mortgage rates are higher but by historical standards they’re not high,” says Fleming. He has a point: East The St. Louis Federal Reserve chart shows the mortgage rate curve since 1975. (See the lowest rates you may qualify for here.)

Affordability is increasingly a challenge for buyers

Home price appreciation has been rapid over the past two years. In fact, according to data from the National Association of Realtors, the median sales price of an existing home is up 17% from last year. “That’s important because it’s been virtually impossible to maintain the purchasing power of housing and, as a result, affordability has decreased,” says Fleming.

Fleming says that home price appreciation, as measured by many of the home price indices reported in the media, has a significant lag, sometimes as long as six months. “It will be a few more months before house price indices reflect how prices have reacted to the rapid rise in mortgage rates in the second quarter,” says Fleming.

Prepare for slower home price growth

But just because affordability is a challenge doesn’t mean home prices will fall. Fleming says his research shows that during times of rising mortgage rates like the one we’re experiencing now, the number of home sales tends to go down, but home prices generally don’t. “The expectation is less sales and less price appreciation,” says Fleming.

The housing market is cooling

Look at inventory levels and the amount of seller price reductions on listings. “These are the main indicators of where prices will go and how rising mortgage rates have affected demand. More inventory and more sales price reductions indicate a cooling market,” says Fleming. For sellers, this means a reset on the expectation of how quickly their home will sell. “Mere days on the market were never normal. In fact, the old adage used to be that sellers should normally expect their house to take up to 3 months to sell on the market. Of course, we’re still a long way from that, but sellers should expect it to take longer to sell their home. For buyers, expect less fierce competition to buy a home,” says Fleming. (See the lowest rates you may qualify for here.)

Consider an ARM and be a smart buyer

Given the current market, Fleming says it’s easy to lose focus amid changes in mortgage rates and other housing dynamics. “The reality is that some basic steps are still important and are not very different from those in any market. Shop around for the best mortgage and, in a market of rising rates, research adjustable rate mortgages for the lowest rate benefit. Make your decisions based on the home as a refuge, rather than a return on investment opportunity, and be patient,” says Fleming.

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