Mortgage rates approached 7% this week, the highest since April 2002, pushing more buyers and sellers out of the market.
Average 30-year fixed mortgage rates rose to 6.94% from 6.92% last week, according to Freddie Mac. Interest rates are up more than a percentage point since his start of September, more than double what he was at the start of the year.
The rapid rise, sparked by the Federal Reserve’s actions to curb runaway inflation, has boosted buyer demand while homeowners are hunkered down, unwilling to give up the current ultra-low interest rates. suffocated.
“The ones who are most affected in terms of affordability are actually first-time buyers. redfin, told Yahoo Money. “Renting is now much more lucrative than owning because interest rates are rising, and if it were easier to rent on better terms, many first-time homebuyers would stay in the market.” can’t even imagine.”
High interest rates cool demand for mortgages
Last week, homebuyer demand fell to its lowest level in 25 years. Investigation was found, decreasing for four consecutive months. Mortgage applications were down 4% from a week ago and down 38% from the same period last year.
Interest rate hikes are driving more buyers to lower interest rate loans (ARMs). ARM’s share jumped to his 12.8% last week from 11.7% last week, the highest rate since March 2008.
Still, it may be too late for some buyers.
“I qualified a gentleman who owns a painting company for $300,000 in March. He called today to get his updated pre-approval.” 220,000.The interest rate was 3.5% then, and now it’s 7%.”
According to Realtor.com, interest rates were 6.92% last week, and the average monthly mortgage payment after offering a 20% discount was $2,254. That’s up about 75% from the same week last year, adding $11,600 to the annual cost of financing a home.
George Ratiu, senior economist and economic research manager at Realtor.com, told Yahoo Money: “They can’t stretch their budget anymore.”
By comparison, the average rent asking price in September was $1,759, down $12 from last month and $22 from its peak in July. This is his slowest growth on record in 16 months and is an encouraging sign for renters despite deteriorating affordability.
“Rising interest rates are really impacting the debt-to-income ratio, making fewer eligible people,” Sharon said. They choose to rent because it makes people aware.”
Home sellers to be cautious
As homebuyers withdraw plans to buy, a growing percentage of home sellers are withdrawing their listings from the market.
The National Association of Realtors reported Thursday that 1.25 million homes were sold at the end of September, down 2.3% from August and down 0.8% from a year earlier. New listings also fell by 17%, suggesting sellers are rethinking their plans.
The median selling price of existing homes was $384,800, up 8.4% from September 2021, but it was the third consecutive month-over-month price decline.
almost 60,000 home purchase contracts According to Redfin, 17% of homes signed in September also fell in September. This was the highest percentage ever recorded outside of March 2020, when the COVID outbreak was first announced.
The days of bidding wars are also disappearing in the rearview mirror. Less than 46% of housing offers written in September faced competition, the lowest share since the outbreak of the pandemic, according to Redfin data. As a result, a record 22% of homes sold in September registered a price cut.
“Many sellers are pulling their homes off the market, but I once marked my house down by $50,000. I don’t want to do it again. I’m just going to stand still,” Ma said. . “I know someone on our team was selling a house in Austin and had to drop the price multiple times before making a decision. I think this is also helping to shift some of the housing supply into the rental market, helping drive down rents.”
Gabriella is a Personal Finance Reporter at Yahoo Money. follow her on her twitter @__gabriellacruz.