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Mortgage rates top 7% for first time since April 2002

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With mortgage rates above 7% for the first time since April 2002, declining homebuyers have more reason to stay on the sidelines.

Average 30-year fixed mortgage rates hit 7.08%, up from 6.94% the week before, according to Freddie Mac. Interest rates are up 3.86% year-to-date, their biggest year-to-date gain in more than 50 years.

The dramatic rise in interest rates, driven by the Federal Reserve’s aggressive fight against inflation, has crushed demand from homebuyers and sapped home sellers’ confidence as lower home prices become more common. I keep losing it.

“Demand remains very soft as mortgage rates and inflation continue to put pressure on homebuyers, and as a result, we believe prices will continue to fall,” said Realtor.com senior. George Ratiu, an economist and economic research manager, told Yahoo. money. “The big question is what it takes to bring prices down. Expecting prices to stay high is unsustainable.”

Rate hikes make homebuyers uneasy

Last week, mortgage demand hit its lowest level in 25 years. Mortgage Bankers Association A survey for the week ending Oct. 21 found that rising interest rates and economic uncertainty continue to undermine buyer confidence. Mortgage applications were down 2% from a week ago and down 42% from the same period last year.

MBA data shows that higher interest rates have led to a shift in percentages of homebuyers to lower-rate products, with Federal Housing Administration loans and adjustable-rate mortgages (ARMs) to ease the financial burden.

“Homebuyers feel they are in an affordable race against the Fed and have little chance of winning,” Adriana Perezchica, president of Via Real Estate, told Yahoo Money. “We are getting calls from buyers who are looking to qualify or are just beginning to consider their buying options. You can hear in their voices the uncertainty ahead. They really want to live in a home. I think, but the climate is not very favorable and if payment is not achievable, we will have to settle for the minimum amount approved at a price that does not exist in the current market.”

Home buyers are losing purchasing power as mortgage rates continue to rise. Mortgage interest rates reduced buyers’ home searches by at least 100 square feet in September, according to Redfin data. (Mike Stocker/Sun Sentinel/Tribune News Service via Getty Images)

The median list price is $427,000 According to Realtor.com, September saw a 13.9% increase from last year. After last week he offered at least 20% down on the 6.94% rate, the monthly payment would be $2,260.

According to Perestika, the numbers have caused many to reconsider their buying plans or lower their expectations.

“I have this family, a mom, dad, and two adult children who need pre-approval to qualify for $500,000. Yes, and their payment of $4,460 is simply out of their comfort zone,” Perezchica said. “They decided to look only for her homes up to $400,000, which meant they were at least an hour and a half away from metropolitan areas, minimizing bedroom and bathroom options for numerous families. It is suppressed.”

“This is a classic story of the last few months,” Perestika said.

“Open House” flags outside a single-family home in Los Angeles, California, September 22, 2022. The US housing market is seeing a slowdown in home sales as the Federal Reserve raised mortgage rates to help fight inflation. (Credit: Alison Dinner, Getty Images)

withdrawal of home sellers

The plummeting homebuyer demand is persuading more sellers to keep the status quo.

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 were also down 17%, suggesting sellers are retreating from the chilly market.

Fewer than 46% of housing offers written by Redfin agents in September faced competition, the lowest level since the start of the pandemic. As a result, a record 22% of homes sold in September were discounted.

“For many people, when they think about what a trade-up will cost, they’re typically looking at a more expensive home, and in some cases, a mortgage that’s double what they have now.” said. “The impact on family budgets is significant.”

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

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