### Summary
Mortgage rates have reached a 21-year high, making home buying more expensive and deterring potential buyers. The increase in rates is largely due to the Fed's monetary policy, including interest rate hikes to combat inflation. Higher rates have also impacted sellers, leading to a decrease in housing supply.
### Facts
- Mortgage rates have climbed to 7.09 percent, a significant increase from the previous year's 5.13 percent.
- Higher mortgage rates have led to more expensive monthly payments for homebuyers, even if the house price remains the same.
- The Fed's interest rate hikes have indirectly affected long-term mortgage rates by making it costlier for banks to borrow money.
- The increase in rates has deterred potential buyers, with 66 percent of them waiting for rates to decrease before purchasing a home.
- Sellers have been less likely to list their homes due to the high rates, leading to a decrease in housing supply.
- It may take some time for rates to come back down, and experts predict downward pressure on rates throughout 2024.
### Summary
House price inflation in Britain slowed in June, with the exception of London, as high mortgage rates deter buyers. Meanwhile, in the US, policymakers are divided over the need for more interest rate hikes, and China's central bank cut a key interest rate due to economic risks.
### Facts
- 💰 Average UK house prices increased by 1.7% in June, down from 1.8% in May, with London being the only region where property prices fell by 0.6%.
- 💸 Policymakers in the US are divided over the need for more interest rate hikes, with "some participants" concerned about the risks of raising rates too far, while "most" officials prioritize battling inflation.
- 🇨🇳 China's central bank unexpectedly cut a key interest rate, the one-year medium-term lending facility (MLF), by 15 basis points to 2.5%, and also lowered the seven-day reverse repo rate to 1.8%.
- 📉 The rate cuts in China were implemented due to a deteriorating property market, weak consumer spending, and sluggish economic data, including trade and consumer price numbers as well as record-low credit growth.
### Summary
Housebuilder shares, including Crest Nicholson, have tumbled after a profit warning, signaling a downturn in the housing market and raising concerns about higher mortgage and interest rates.
### Facts
- Housebuilder Crest Nicholson issued a profit warning, resulting in a sell-off across the sector.
- The housing market downturn is negatively impacting the domestically-focused FTSE 250 index, which is down more than 4% this year.
- The UK homebuilders index fell 2.9% in early trading after Crest Nicholson's profit warning.
- Shares of Taylor Wimpey, Barratt Developments, and Persimmon also dropped due to the profit warning.
- Crest Nicholson's share price is down 14.4%, on track for its biggest daily drop since June 2020.
- The housing market has slowed considerably this summer, impacting Crest Nicholson's profit forecast.
- Worsening trading conditions, high inflation, and rising interest rates have contributed to the decline in the housing market.
- Crest Nicholson attributed the slowdown to mortgage costs, lack of government support, and economic uncertainty deterring potential buyers.
- The company does not anticipate an improvement in trading conditions before its year-end.
- European markets are relatively muted, with slight gains across the FTSE 100, German DAX, French CAC 40, Spanish IBEX, and European STOXX 600.
- UK home sellers have slashed asking prices by an average of 1.9% in August, the fastest decline since summer 2018, in response to high interest rates impacting mortgage costs.
- China has cut one of its key lending rates to stimulate its weakening economy, but concerns over the currency have prompted caution.
High mortgage rates, reaching their highest level in 21 years, are driving up costs for home buyers and creating a sluggish housing market, with little relief expected in the near term.
The cost of buying a home in the UK has become more difficult due to a steep surge in interest rates, despite wages increasing faster than house prices over the past year, according to mortgage lender Halifax.
The U.S. housing market is currently experiencing a decrease in affordability due to high mortgage rates and stubbornly high prices, with affordability levels lower than during the 2006 housing bubble; however, experts do not predict a crash in the market due to a shortage of homes and a more stable lending environment.
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%.
British home prices are expected to fall by 4% this year due to high interest rates and living costs, despite the shortage of supply, according to a Reuters poll, with potential buyers being kept out of the property market; however, prices are expected to recover from 2024.
Surging interest rates in the UK have led to a slump in factory output, the biggest annual drop in house prices since the global financial crisis, and signals of distress in different sectors of the economy, posing a dilemma for the Bank of England as it decides whether to raise interest rates further.
Rapidly falling house prices have caused a "cost of owning crisis," with tens of thousands of homeowners falling into negative equity over the past year, making it difficult to sell or remortgage properties. Experts predict that more households will face difficulties as house prices continue to decline, with the Government's tax and spending watchdog expecting a 10% fall in prices. However, there are expectations of a rebound in house prices in the future, particularly for those intending to live in their homes for several years.
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 average 30-year fixed mortgage rate has jumped to 7.19%, the second-highest rate since November, signaling a decline in U.S. housing affordability; experts predict varying future rates, with some expecting a decline and others projecting rates to remain relatively high.
British house prices experienced the most widespread falls in 14 years in August due to weakened demand, high mortgage costs, and economic uncertainty, according to a survey conducted by the Royal Institution of Chartered Surveyors (RICS).
Rising borrowing costs have led to the highest rate of canceled home purchases in almost a year, with nearly 60,000 deals falling through in August, equaling 16% of homes under contract.
UK homeowners are feeling the strain as interest rates remain high, with many struggling to afford increased mortgage payments and considering drastic measures such as taking in lodgers or canceling expenses in order to make ends meet.
The United States housing market has seen a 21 percent decline in previously occupied home sales over the past year, continuing the slowdown caused by rising interest rates, while prices continue to rise despite the decrease in sales, leading to a shortage of affordable homes and worsening home affordability for the foreseeable future.
Zillow economists predict a 5% increase in home prices over the next year due to higher mortgage rates prolonging the housing market freeze.
Mortgage holders and first-time buyers receive a boost as lenders cut rates, with some fixed deals available below 5%.
The rise in housing prices over the past three years can be attributed to a shortage of supply, low volume in the market, and the introduction of mortgage rate buydowns; however, there is now a risk of too much inventory being introduced into the market, and a potential decline in mortgage rates could lead to a large amount of existing homes being sold and a subsequent oversupply.
Sales of newly built homes in the housing market decreased by 8.7% last month, indicating that higher mortgage rates are negatively impacting the industry.
Sales of newly built homes fell 8.7% in August, reaching the slowest pace since March, due to increased mortgage rates and stretched affordability, with expectations of further decline by the end of the year.
Mortgage applications and housing demand have dropped as a result of increased mortgage rates, which are now at their highest levels in over 20 years, leading to limited inventory and fewer options for buyers.
The average rate on a five-year fixed mortgage in the UK has dropped below 6% for the first time since July, providing some hope for borrowers, although rates are still higher than they were a few months ago, and experts do not expect rates to reach the ultra-low levels seen in the past.
Pending home sales in the US dropped 7.1% in August, following a surge in mortgage rates to levels not seen in 20 years, with all four US regions experiencing monthly losses and year-over-year declines in transactions.
Experts are divided on the future of US home prices, with some predicting a surge and others expecting a decline, as homeowners are reluctant to sell their homes with cheap mortgages and buyers are hesitant to overpay. Jeremy Grantham believes prices will come down by 30%, while Barbara Corcoran predicts a surge of 15% to 20% once interest rates decrease. David Rosenberg forecasts a recession and a potential 25% plunge in house prices, while Glenn Kelman believes the housing market has hit rock bottom. Vincent Deluard expects prices to drop when homeowners eventually sell.
UK mortgage approvals have reached their lowest level in six months due to high interest rates cooling the housing market, according to the Bank of England, with net mortgage approvals for house purchases falling to 45,400 in August from 49,500 in July.
UK house prices are dropping at the fastest rate since 2009, driven by higher mortgage rates and affordability constraints, but buyer demand and consumer confidence are showing signs of improvement. Lowering mortgage rates could be key to revitalizing the housing market, which is expected to end the year with prices 2-3% lower than at the beginning of the year.
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.
The average rate on the 30-year fixed mortgage rose to 7.72%, the highest since 2000, due to climbing yields on the 10-year Treasury and strong economic data, resulting in decreased housing market activity and affordability concerns.
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.
Mortgage rates have continued to rise, causing a 6% decrease in mortgage demand and the lowest level of activity in the housing market since 1995.
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 risen again, reaching 7.49%, contributing to a decline in demand in the housing market as potential buyers hesitate due to high rates and limited inventory.
The housing market is currently considered overvalued, with homes selling above their long-term prices in most major markets, but experts disagree on whether this indicates a housing bubble or if high prices are justified due to the housing shortage and strong demand. The fear of buying at the peak of the market and concerns about rising mortgage rates are factors influencing buyer decisions, but if rates come down, it could lead to an increase in prices. While there is a possibility of a price correction, most experts do not expect another housing crash like the one experienced during the Great Recession.
The median down payment for US homebuyers increased by 11.3% to $30,434 in the third quarter of 2023, the highest amount since 2013, indicating that buyers are leveraging their wealth to outcompete others in the market and reduce their monthly mortgage payments.
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%.
September saw a significant decline in home sales, with the lowest tally since 1995 and a 32 percent drop from the previous year, due to high interest rates and homeowners' reluctance to sell and move to a place with a higher monthly payment, leaving few options for prospective buyers.
