series of federal reserves interest rate hike this year It threw cold water on the once-red-hot housing market.
Existing home sales fell 0.4% in August for the seventh straight month, according to the National Association of Realtors. This is because the central bank aggressively raised interest rates. cool the economy curb high inflation. This has led to higher mortgage rates and increased borrowing costs for homebuyers by hundreds of dollars a month.
The average interest rate on a 30-year fixed-rate mortgage has more than doubled since the beginning of the year to 6.02% in the week ending September 15, according to mortgage lender Freddie Mac.
Glenn Brunker, president of financial firm Ally Home, told ABC News, “The recent Fed rate hikes may continue to impact affordability.
Although home prices have fallen from their spring peaks in some markets, they are still above the levels of a year ago.
The median resale home price for August was $389,500, down from $403,800 in July, but still 7.7% higher than the same period last year. As demand for housing declines, the inventory of homes for sale increases, giving homes more time to be on the market.
“So a bidding war that might have cost more than a rate hike a few months ago is unlikely today,” Mr. Brunker said. “But while house prices are falling in relative terms, they are not falling as fast as interest rates are rising.”
As of mid-2022, variable rate mortgages (ARMs) accounted for nearly 10% of all new mortgage applications, according to the Mortgage Bankers Association. As interest rates rise, variable rate loans become more attractive to buyers who don’t like fixing high interest rates.
When considering ARM, experts say buyers should be aware of loan limits. This limits the total amount the interest rate can be raised after the fixed rate period ends. Designed to protect buyers from a sharp rise when the adjustment period begins.
If you’re looking for a home, Blanker recommended getting a mortgage pre-approval.
“If a buyer is ready to buy a home in a fast-moving market, it’s important to have a pre-approval letter on hand,” says Brunker. and that the lender is committed to financing their home.”
Experts continue to point to the need for more housing to ease the inventory shortage, but the latest figures are not encouraging.
Confidence in home builders fell for the ninth month in a row in September, according to the National Association of Home Builders. Residence permits, which could usher in future housing construction, fell by 10% in August, according to the Department of Commerce.