Home News Homebuyers are having a ‘come to Jesus’ moment as mortgage rates now top 7% — here’s when things are expected to get better

Homebuyers are having a ‘come to Jesus’ moment as mortgage rates now top 7% — here’s when things are expected to get better

by admin
0 comment

With mortgage rates currently above 7%, homebuyers are having a “come to yes” moment.

Interest rates on America’s most popular mortgages have crossed 7% for the first time in 20 years as the housing market faces a potential long-term slowdown.

Rapidly rising mortgage rates are hurting homebuyers, with projections showing they will remain weak through 2023.

Home sales and new listings have hit record lows since the early days of the pandemic, with more than 20% of sellers cutting their asking prices in September, according to Redfin real estate firm.

“People have come to yes about the housing market,” said Redfin CEO Glenn Kelman. interview on CNBC this week.

“So people who are still in the market for Thanksgiving want to sell, but most people are just delisting.”

Do not miss it

30 year fixed rate mortgage

Average interest rates on 30-year fixed rate mortgages were 7.08% this week, up from 6.94% last week. Freddie Mac reported Thursday.

At this point last year, the 30-year rate averaged 3.14%.

Once interest rates rise above 7%, many homebuyers are set to wait a long time on the sidelines as rising borrowing costs push them out of the market altogether.

“Homebuyer affordability took a big hit in September,” said Edward Thaler, associate vice president of housing economics at the Mortgage Brokers Association (MBA).

“As mortgage rates continue to rise, borrowers’ purchasing power is shrinking,” he said. “His median loan amount in September was $305,550, well below his February peak of $340,000.”

Those who are buying have a much higher monthly payment. Median mortgage payments nationwide have increased by $558, or 40.4%, since early 2022, according to the MBA. index It measures how your monthly mortgage payments change over time compared to your income.

15 year fixed rate mortgage

average rate of 15 year fixed rate mortgage Freddie Mac said it was 6.36% this week, up from 6.23% last week.

A year ago, the average interest rate on a 15-year mortgage was 2.37%.

Part of the reason mortgage rates have skyrocketed is that the Federal Reserve’s Fearless Hiking It’s an effort to slow the economy down and keep very high inflation in check.

Although the Federal Reserve does not set mortgage rates directly, changes in Federal Reserve interest rates ultimately affect the amount consumers pay to buy a variety of goods, such as cars and homes. affect the amount.

5 year variable rate mortgage

The average five-year adjustable rate mortgage (ARM) rate this week was 5.96%, up from last week’s average of 5.71%.

At this point last year, the five-year ARM averaged 2.56%.

ARMs start with a fixed rate term (usually 3 to 10 years). Interest rates are usually lower than fixed-rate loans like his 30-year loan, which is more popular.

After the initial period, the ARM rate is adjusted up or down based on benchmarks such as: prime rate.

what is happening to house prices

Home prices have moderated in some areas, but remain relatively high in most markets. Combined with high borrowing costs, buying a home is no longer possible for many Americans.

“Many potential homebuyers are choosing to wait and see where the housing market will ultimately head, further pushing demand and home prices down,” said Sam Cater, chief economist at Freddie Mac.

of Case-Shiller Home Price Index August marks the fifth straight month of slowing annual house price gains. The index rose 13% from 15.6% in July.

Annual growth will slow to 9% by December and fall to less than 1% by the end of March 2023, according to CoreLogic’s Home Price Index forecast.

According to CoreLogic, high mortgage rates are having a serious impact on affordability in West Coast and mountain markets.

Mortgage applications continue to decline

The index, which measures mortgage applications, fell another 1.7% last week compared to the previous week, according to the Reuters. MBA Weekly Survey.

Specifically, mortgage applications for home purchases fell 2%, the slowest pace since 2015. Meanwhile, refinancing applications were essentially flat. Purchased mortgages were down 42% and refinancings were down 86% compared to last year.

MBA vice president and deputy chief economist Joel Kan said:

According to the latest data, average 30-year fixed mortgage rates are expected to peak in the fourth quarter of this year and then begin to decline in 2023. MBA prediction.

“MBA forecasts show a 3% decline in purchase starts and a 24% decline in refinancing volumes in 2023 due to the economic and housing market downturn,” Kan said.

what to read next

  • Nearly Three-Quarters of Pandemic Home Buyers Have Regrets — What You Need to Know before making the offer

  • ‘It’s not the time to be greedy’: Homeflippers are now burning by the U.S. housing market slump, cutting prices to cut losses — here are two big reasons

  • Did you buy a home before 2022? If the answer is no, the next decade will be headed in the wrong direction of economic inequality. this is the reason

This article is for information only and should not be construed as advice. It is provided without warranty of any kind.

You may also like