Mortgage rates fell below 7% this week, but remain high enough to sideline homebuyers worried about prices.
Average 30-year fixed mortgage rates fell to 6.95% from 7.08% last week, according to Freddie Mac. Still, interest rates are up 3.73% year-to-date, their biggest year-to-date gain in over 50 years.
The sharp rise in interest rates, combined with rising house prices and still-high inflation, has triggered a fight-or-flight reaction among buyers and sellers. Some are fleeing the market altogether, while others are trying to decide to buy or sell before interest rates rise even further.
“Right now, homebuyers are having a pretty tough time. Home prices are still very high, the inventory of available homes is still very low, and mortgage rates are at their highest level in 20 years. It’s pretty detrimental.” HSH.com, told Yahoo Money. “These conditions are unlikely to improve significantly, at least for the time being, and inventory issues could become even more severe as the holiday season approaches, as sellers wait for better conditions.”
Homebuyers migrate to ARM
Mortgage applications have fallen for the sixth straight week, according to the latest Mortgage Bankers Association. Investigation, as rising interest rates continued to dampen both buyer and refinancing activity. Purchase requests for the week ended Oct. 28 were down 1%, down 41% from the same week a year earlier.
More buyers are turning to variable rate mortgages to offset the economic impact of rising interest rates.
Last week, ARM loans were the only product with an interest rate of 3%, MBA economist Joel Kan said in a news statement, while all other loan types were more than double what they were a year ago.
“Now is a good time to be opportunistic for those brave enough to enter the market. Consider saving your dollars,” Gambinger said. “Of course, we are aware of the risks and are always on the lookout for opportunities to refinance to fixed rate mortgages. It could be a 10% improvement or a significant reduction in monthly payments.”
Still, the numbers aren’t faring for many other buyers.
At current rates, homebuyers face about $1,000 more monthly mortgage payments than they did a year ago, according to Realtor.com. At his 7.08% interest rate last week, a typical buyer paying a 20% down payment would face about $2,296 in monthly mortgage payments.
the seller withdraws
Home sellers are even more discouraged as the buyer pool shrinks.
According to the National Association of Realtors, 1.25 million homes were sold at the end of September, down 2.3% from August. New listings also slowed, down 17% as more sellers exited the cold market.
For those who still want to trade, we offer incentives.
The share of discounted homes rose 10.3 percentage points in October to 20.9%, above levels in 2017 and 2019 but just below 21.2% in 2018, according to Realtor.com. Overall, the median listing price in October fell $2,000 to $425,000.
Redfin’s deputy chief economist, Taylor Marr, told Yahoo Money: “Sellers who are not afraid of market weakness are willing to take what they can get.”
Gabriella is a Personal Finance Reporter at Yahoo Money. follow her on her twitter @__gabriellacruz.