Home News Mortgage rates jump over a half-point in two weeks

Mortgage rates jump over a half-point in two weeks

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Mortgage rates surged again this week, leaving price-weary homebuyers still in the market.

Interest rates on 20-year fixed mortgages rose to 5.66% from 5.55% the week before, according to the Reuters. freddie mac, up more than half a point from two weeks ago. Although he is lower than the 5.81% registered in June, he remains more than two points higher than at the beginning of the year.

Rising borrowing costs are keeping cash-strapped homebuyers divided. Some have postponed their purchase plans and have chosen to wait for better market conditions, while others are taking advantage of the drop in competition to negotiate with sellers.

“Rising mortgage rates come at a particularly vulnerable time for the housing market as weaker demand has forced sellers to readjust their pricing,” Sam Cater, chief economist at Freddie Mac, said in a news release. .

Buyers have never been more nervous about the housing market since the early 2000s.

Demand for mortgages hit a multi-decade low in August, according to a report. of the Mortgage Bankers Association survey for the week ending Aug. 26 as refinancing and buying activity continued to decline. Eight of the last nine weeks saw a decline in his purchasing activity, down 23% from the same period last year.

Rising borrowing costs are the cause of the slowdown in activity, but rising inventories and slower home price growth may push some buyers back into the market.

There are signs that first-time buyers are coming back. Applications for government mortgages from the Federal Housing Administration, the Department of Veterans Affairs, and the Department of Agriculture have all been popular among first-time buyers, according to the MBA, and have recorded increases in recent weeks.

“Government lending is definitely more active this year than last year or the year before,” said Robert Heck, vice president of mortgages. MortyThe online marketplace told Yahoo Money. “It’s not huge, but we definitely see that pickup as an option.”

A sign in front of a house for sale in San Francisco, California, July 14, 2022. The number of homes for sale in the US increased by 2% in June for the first time since 2019. High interest rates, combined with a weak economy and soaring home prices, are keeping many home buyers out of the market. (Photo by Justin Sullivan/Getty Images)

As buyer demand slows, so do home prices.

The median house price is $435,000 According to Realtor.com, August saw $449,000, down from a June record of $450,000.

“Housing prices are rising or accelerating less, or at least starting to slow,” Heck said.

Still, home prices remain 36.9% higher than in August 2019, posing a challenge for first-time buyers. At 5.55% last week, the median monthly payment for a typical home was $2,050, up about 61% from last year.

“Rising interest rates combined with rising home prices have really killed off affordability,” said Keith Gunbinger, Vice President. HSH.com, told Yahoo Money. “The income required to buy a home is 30% to 40% higher than it was at the same time last year. No one is.”

A discounted price ad outside a home for sale in Dallas, Texas.  (Credit: Jessica Rinaldi, Reuters)

A discounted price ad outside a home for sale in Dallas, Texas. (Credit: Jessica Rinaldi, Reuters)

Home sellers adjust price expectations

With more hesitant buyers, sellers are becoming more open to negotiations.

According to Realtor.com, nearly a fifth of the homes on the market saw price cuts in August.another 92% of sellers accepted buyer-friendly terms Last month, all the sellers we surveyed agreed to contingencies like home inspections and appraisals and said they agreed to make some repairs when asked.

Newfound bargaining power is in numbers: at least 67% Percentage of buyers who requested repairs in August compared to 31% of buyers who requested 6-12 months ago.

“There has been a pretty drastic shift in the market this year, both in terms of infrastructure and certainly housing prices, and the affordability equation has changed quite a bit from where it was earlier this year to where it is now,” Gambinger said. Told. “We are currently in a period of adjustment. [but] We are slowing down now. “

Gabriella is a Personal Finance Reporter at Yahoo Money. follow her on her twitter @__gabriellacruz.

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