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Rising Mortgage Rates Dampen Home Sales and Affordability

  • Home sales disappointed in August as higher mortgage rates weighed on buyers. Sales could fall further if rates rise to 8%, one economist warned.

  • Inventory remains low, with only 1.1 million homes for sale in August. That's down 0.9% from July and 14.1% lower than last year.

  • Median home prices hit a new high of $407,100 in August, up 3.9% from a year ago. Prices are propped up by tight supply.

  • Most homeowners have mortgage rates well below current levels. That deters them from selling and losing their low rate.

  • The Fed forecasts higher rates for at least 3 more years. That signals ongoing headwinds for affordability and home sales.

yahoo.com
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The surge in mortgage rates has caused housing affordability to reach the lowest level since 2000, leading to a slow fall in the housing market and a potential dip in home prices, although the current market differs from the conditions that preceded the 2008 crash, with low housing inventory and a lack of risky mortgage products, making mortgage rates the key lever to improve affordability.
Mortgage rates topping 7% have led to a significant drop in mortgage applications for home purchases, with last week seeing the smallest volume in 28 years. The increase in rates, driven by concerns of high inflation, has priced out many potential buyers and contributed to low housing supply and high home prices. As a result, sales of previously owned homes have declined, and homeowners are reluctant to sell their properties due to the higher rates. Some buyers are turning to adjustable-rate mortgages to manage the increased costs.
Homebuyers' purchasing power has been negatively impacted by rising mortgage rates, which averaged 7.2% in August, the highest level since 2001, resulting in a decline in existing home sales and a shift towards new-construction homes.
Buyers of newly built homes are enjoying lower mortgage rates, as home builders are allocating a portion of the sale proceeds to permanently buy down the rates, leading to higher new home sales.
Mortgage rates have increased recently due to inflation and the Federal Reserve's interest rate hikes, but experts predict rates will remain in the 6% to 7% range for now; homebuyers should focus on improving their credit scores and comparing lenders to get the best deal.
In August, the number of homes actively for sale decreased by 7.9% compared to the previous year, while the total number of unsold homes, including those under contract, decreased by 9.2%.
Mortgage rates above 7% are worsening the affordability crisis, limiting younger buyers' ability to purchase homes and causing millennials to lag behind previous generations in homeownership, as rising rates and prices erode buying power.
Average 30-year mortgage rates are still elevated at 6.94% in August, but they are expected to come down by the end of the year; however, a significant drop that will boost homebuying demand is not likely until 2024 or 2025, but there are advantages to buying a home even when rates are high, such as less competition.
The percentage of Americans paying $2,000 or more per month for a home mortgage has increased significantly in the past two years, with 51% of homebuyers facing these high payments in July 2023, compared to 18% in 2021, according to data from Black Knight. Additionally, nearly a quarter of homebuyers now have mortgage payments above $3,000, highlighting the unaffordability of the housing market for many Americans.
US mortgage rates have decreased slightly for the second consecutive week, but they remain above 7%, causing home affordability to reach its lowest level in nearly four decades.
The Atlanta-area housing market in August reached a plateau with slow price increases due to high mortgage rates, limited inventory, and a housing shortage, but experts predict a flood of buying once mortgage rates decrease.
Mortgage rates have slightly decreased from their peak in late August, but future trends will depend on the economy and inflation rates, with potential decreases if inflation slows and the Federal Reserve stops increasing its benchmark rate.
The Greater Boston housing market experienced a slow month in August, with home sales dropping to their lowest point for the month since 2010, primarily due to higher interest rates and a shortage of available homes for sale, leading to increased competition and higher prices for buyers.
The pace of new construction in the housing market slowed in August due to high mortgage rates and weakening demand, with housing starts falling to the lowest level since 2020, although building permits increased month over month.
U.S. homebuilding fell to a three-year low in August due to higher mortgage rates, but permits for new construction increased, signaling support from a shortage of homes on the market.
Home prices continued to rise in August due to low inventory and high mortgage rates, causing a drop in home sales, according to a report from the National Association of Realtors.
Sales of previously owned homes in the US fell for the third consecutive month in August, as higher mortgage rates, rising prices, and a lack of available properties have limited homebuyers' options.
Sales of previously owned homes fell 0.7% in August from July, with high mortgage rates and tight supply impacting potential buyers.
Home sales in the American Midwest defied the national trend by increasing in August, while sales across the country declined, due to high mortgage rates and low supply, according to data from the National Association of Realtors. Overall, home sales decreased by 0.7% in August and over 15% from the previous year, but analysts noted a stabilization in the market. The Midwest saw a 1% increase in home sales compared to July, but a more than 16% decline compared to the previous year.
Mortgage rates have increased in the past week, and while experts believe rates are unlikely to reach record lows seen during the pandemic, there is a possibility of rates decreasing before the end of the year if inflation continues to moderate. It is advised for homebuyers to focus on improving their credit scores and saving for a down payment to increase their chances of qualifying for the best rate.
Rising mortgage rates and seasonal factors have led to a 7.1% plunge in pending home sales for August, with every region experiencing a decline, exacerbating the existing issues of expensive mortgages, rising prices, and low inventory in the housing market.
High mortgage rates and rising home prices are causing homebuyers to shy away from homeownership, with many canceling purchase agreements and sellers becoming more willing to negotiate on asking prices.
Mortgage approvals for house purchases have reached a six-month low in August, signaling a decline in lending and making it harder for buyers to secure homes due to rising interest rates; however, there is still hope that the market can recover if the Bank of England stops increasing interest rates and both buyers and vendors become more realistic.
As the US housing market starts to cool down, homebuyers are being presented with a good opportunity as more homes see price reductions, according to Zillow, with 9.2% of listings having a price cut in the week ending September 16, a higher rate than in 2019.
October mortgage rates are expected to remain high, making it difficult for homebuyers to afford properties, despite some sellers reducing their asking prices, according to forecasts from mortgage experts.
Rising mortgage rates are impacting home affordability, which has been declining since early 2021, causing some sellers to reduce their asking prices, but the lack of available properties remains a challenge for most buyers.
Higher interest rates are making homes less affordable for potential buyers, leading to a lack of inventory and driving up prices in the housing market.
Mortgage rates in the U.S. housing market are approaching 8%, causing concern and potentially discouraging home-buying demand due to higher monthly mortgage payments relative to incomes.
Mortgage rates have reached a 23-year high, causing a decline in homebuyer demand and an increase in lower-rate options, with the possibility of rates hitting 8% this year.
Mortgage rates reaching a 23-year high in Seattle have led to fewer housing deals and stagnated prices, as buyers struggle to afford higher rates and sellers are hesitant to move with low rates in their current homes.
Higher mortgage rates are adding strain to prospective homebuyers as elevated home prices and a lack of inventory make it difficult to find affordable housing, with the 30-year fixed-rate mortgage now at its highest level since December 2000.
Mortgage rates are expected to fall in the coming months, offering homebuyers more affordability and potentially boosting the housing market.
Mortgage rates dropped at the end of the week, with the 30-year fixed-rate average at 8.07%, significantly lower than the previous week's historic high of 8.34%.
Mortgage rates are expected to decrease significantly by the end of 2024, but a shortage of available homes will lead to higher sales prices for the next few years. Despite the drop in rates, the low inventory of new homes will drive up purchase costs. Additionally, a sluggish economy, rising unemployment, and declining inflation may lead to a recession in early 2024. However, the combination of these factors will eventually help bring down mortgage rates further in the following years.
Mortgage rates nearing 8% and a shortage of homes for sale are preventing potential homebuyers, particularly first-time buyers, from entering the market, leading to a 2% decrease in existing-home sales in September compared to the previous year.
Mortgage rates reaching 8% are causing a tighter supply of homes for sale, leading to increased demand and further deteriorating affordability, according to Morgan Stanley analysts who warn that if rates stay at this level, affordability would reach its most severe level in decades. Despite the unaffordability, the analysts predict that home prices will likely increase due to low supply and a lack of negative shocks to the broader economy.