Home News Nicklaus: Higher mortgage rates are cooling the red-hot housing market | David Nicklaus

Nicklaus: Higher mortgage rates are cooling the red-hot housing market | David Nicklaus

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The bright red housing market is beginning to cool as mortgage rates rise with summer temperatures.

Prices continue to rise — in Metro St. Louis, as of March, they were up 14% year-on-year. Federal index — But the bidding war isn’t as fierce as it was a few months ago.



Matthew Murren, an agent at Berkshire Hathaway Home Services in Town and Country, said it was as if Memorial Day had been switched on. His typical list has now dropped from 5 to 10 in May, receiving two or three offers, and buyers are no longer abandoning home inspections and other contingencies.

“Rates are probably what caused it, but there are also psychological consequences from everything else happening in the economy,” Muren said. “Everyone needs to take a break and recalculate.”

The Average 30-year mortgage rate It doubled from a low of 2.8% last summer to 5.7%. In addition to the higher price, it means that the typical buyer’s monthly payment is 50% higher than it was a year ago.



Jeff Tucker, Zillow’s Senior Economist, said: “It reduces the choices of what people can buy.”

Zillow numbers show subtle changes in the market. 9.5% of sellers in the St. Louis region cut prices from 7.8% in April to May. This is still well below the 16.9% list that was reduced in May 2019.

Price increases have slowed, but Tucker doesn’t expect them to reverse. After the 2008 and 2009 housing crisis, inventories remain low as builders haven’t built many new homes for 10 years.

Millennials, on the other hand, are the peak year of home buying and the coronavirus pandemic. Created new demand Because the house has become a workspace.

Tucker believes that the combination of strong demand and limited supply should keep prices rising for the rest of the year. “Prices may level off sometime next spring and early summer, but we don’t anticipate a significant drop in prices,” he said.

The American Enterprise Institute’s National Home Price Index rose 17% over the 12 months ending in May. Ed Pinto, director of the Institute’s Housing Center, predicts that it will slow to 10% by August and 6% by December.

Like Tucker, Focus doesn’t expect prices to fall nationwide, but he thinks they could fall in some areas. He said price declines are most likely in areas where employment growth is sluggish, a category that includes St. Louis.

Within these areas, Focus predicts that low-income areas with affordable housing will be hit hardest. “The only tailwind they had was the Federal Reserve,” he said, “and now the tailwind has disappeared,” referring to the Federal Reserve’s two-year ultra-low interest rates.

For homebuyers, the disappearance of tailwinds means a difficult decision about what they can buy. Murren sees buyers looking at cheaper neighborhoods, looking at small homes, and putting searches on hold.

“Buyers who were ready to spend $ 350,000 are now in the $ 300,000 range,” he said. “The buyer pool for all sellers has shrunk.”

Still, Murren knows 2021 Extreme Seller Market And early 2022 is rare, he believes, the more inventories, the healthier the market. He hopes buyers missing from recent open houses will return after adjusting to higher mortgage rates.

“It takes time for everyone to worry about rapid changes, but it will happen,” he said.

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