Half The Homes, For 50% More Money: An Honest Look At Homebuyers’ New Reality
Half The Homes, For 50% More Money: An Honest Look At Homebuyers’ New Reality
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Half The Homes, For 50% More Money: An Honest Look At Homebuyers’ New Reality
If you’re the type of homebuyer whose mood soars or plummets depending on the latest mortgage rates, then this week was a tough one.
Mortgage interest rates climbed to 6.73% for a 30-year fixed-rate mortgage, for the week ending March 9, according to Freddie Mac. This means today’s homebuyers will have to pay almost 50% more per month for home than they would have just a year earlier.
This steep hike in housing costs might hurt the rebound that had been emerging in the housing market, when rates were lower earlier this year.
“Recent signs of a housing bottom have been encouraging, but the still-shifting financial and economic landscape makes it hard to pinpoint whether the floor is firm enough to withstand these new challenges,” says Realtor.com® Chief Economist Danielle Hale in her most recent analysis. “In the meanwhile, that means housing activity is likely to continue roughly in line with its recent low pace of sales.”
As for what happens next, mortgage rates “will likely play a strong role in determining whether the market slows further or picks up speed,” says Hale. “While the housing market had shown some signs of stabilizing, a renewed climb in mortgage rates could undermine the recovery.”
And while no one knows for sure which direction interest rates will head next, stubborn inflation might force the Fed to continue bludgeoning the economy with rate hikes, which could mean mortgage rates may rise further.
What then? We’ll explore what this all means for both homebuyers and home sellers in our latest column of “How’s the Housing Market This Week?”
How home prices react to high mortgage rates
But there is one bright spot for homebuyers: Housing prices might still be growing, but that growth is tapering off.
For the week ending March 4, home prices increased by 6.3%, compared with where they were a year earlier—the slowest rise seen since June 2020, right when the market was recovering from the initial COVID-19 pandemic shock.
What’s behind the slowing of home price growth? Believe it or not, sellers have finally gotten the memo that buyers need lower prices to offset those higher interest rates they’re paying today. Despite many sellers sitting out the current market, the ones who are trying to find a buyer seem to be finally “calibrating their price expectations,” according to Hale. As a result, price growth is easing.
When mortgage rates were low but inching up in June 2022, buyers made a last dash to buy a home, which drove up home prices to a record high of $449,000. But by February 2023, as mortgage rates were pingponging between 6% and 7%, listings settled toward a median asking price of $415,000.
And although listings took 18 more days to sell—for the week ending March 4—than a year earlier, the pace is picking up a bit.
“This marks the third week that the gap has shrunk, even as new listings remain scarce, suggesting that buyers are active in the market,” says Hale.
Home inventory continues to stagnate
While high mortgage rates aren’t stopping certain buyers, home sellers seem to be more reluctant to jump in.
New listings have been falling for 35 weeks straight, plummeting by 26% for the week ending March 4, compared with a year earlier. Yet overall home inventory (of both new and old listings) continues to balloon—up 61% from last year at this time.
This rise in the number of unsold homes on the market might seem shocking, until the figure is considered in a larger context that factors in our pre-pandemic days.
“It’s important to remember that this year-over-year comparison is relative to early 2022, when active listings were at or near long-term lows,” explains Hale. “So even after this huge year-over-year gain, February data shows that nationwide, there are only just more than half as many homes for sale as were available pre-pandemic.”
Half as many homes, for 50% more money? It’s no wonder buyers are hurting. Here’s hoping spring brings better news.
Source: www.realtor.com
Author: Margaret Heidenry
M&M NEWS
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