Buyers and sellers have likely noticed the uptick in mortgage rates as they search for and sell houses. Those rising rates will continue to affect home values and the real estate market as a whole.
Mortgage costs have risen as the Federal Reserve has been raising rates steadily over the last few months. With higher rates, you get fewer offers. But don’t let the rising rates fool you: the real estate market is still on fire, and many homes are still spending a hot minute on the market before being snagged by an eager buyer.
That being said, downward trends are being noticed as things begin to cool off a bit. According to CNBC, 12 percent of homes for sale experienced a price drop in April of 2022, up from nine percent a year ago. Other key takeaways:
- The number of new listings in the past few weeks increased by eight percent from one year ago, following four weeks in a row of annual declines for new listings.
- The average rate on a 30-year fixed mortgage took a steep upturn in the past few weeks, surpassing five percent, says Mortgage News Daily.
If you’re a buyer, you may be able to get some relief in the coming weeks and months as more listings appear on the market and some sellers start to lower their asking prices.
Higher mortgage rates are starting to make houses less affordable, with the average borrower now shelling out 38 percent more than they would have paid for that same home one year ago.
For some buyers, inflation coupled with mortgage rate hikes give them less flexibility in their budget to go after newly listed homes. For buyers who are still able to afford to pursue newly listed homes, they will start to see less intense competition when putting in an offer.
As more inventory starts to flood the market and mortgage rates continue to rise, sellers will have to adjust their expectations. Approximately 12 percent of homes as of April had to post a price reduction – something virtually unheard of a year ago.
But while price drops are still rare, their very presence is showing us that the market may be cooling some. Even though there’s still more demand than supply, sellers won’t be able to continue to overprice their homes while expecting a bidding war.
Buyers are starting to sweat, though, because while there’s more inventory, the mortgage rates are rising and are now above five percent, according to Mortgage News Daily. In comparison, last year at this time, mortgage rates were in the two percent range.
The reduction in amount of homes for sale, coupled with double-digit price boosts and the sharp increase in mortgage rates, are all taking a toll on home sales around the country. In fact, new home sales were down 12 percent in March 2022 as compared with March 2021, says the Census Bureau.
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