Mortgage Rates Just Dipped—But Will They Spike Again? Here’s What the Latest Stats Say
For the past two years, homebuyers faced hoards of competition that was driving housing prices sky-high. Today, though, the pool of eligible buyers has ebbed, largely due to a whole new problem: Towering interest rates.
Indeed, the average rate for a 30-year fixed mortgage hovered at 6.95% for the week ending Nov. 3, according to Freddie Mac. That’s a bit lower than last week when it broke the 7% threshold, but still more than double what it was a year earlier.
Given that a typical homebuyer’s mortgage costs have risen more than 77% compared to a year ago, it’s understandable that the housing market is in shock. And the latest real estate statistics for the week ending Oct. 29 show that the fallout continues.
In this latest installment of our column “How’s the Housing Market This Week?” we’ll look at what the most recent numbers mean for both homebuyers and sellers.
Will mortgage rates keep rising?
Odds are, America’s already staggering mortgage rates will keep rising in reaction to the Federal Reserve’s efforts to tame inflation.
“Chair [Jerome] Powell made it clear that taming inflation is a top priority that will likely require a higher policy rate than was previously expected,” says Chief Economist at Realtor.com® Danielle Hale. While mortgage rates aren’t directly tied to the Fed’s actions, they do tend to react in tandem. As Hale explains, “Mortgage rates are likely to follow these expectations higher.”
High mortgage interest rates may feel all the more intimidating given home prices in October currently hover at $425,000. And for the week ending Oct. 29, home prices continued to increase by 12% compared to that same week last year, hitting the 44th week of double-digit growth.
Why are home prices still rising annually? Because some buyers—looking to the Fed’s promise of continuing to jack up interest rates—are still making offers, likely trying to outrun the market.
“Despite affordability challenges in today’s housing market, the homeownership rate continued to climb in the third quarter as households looked to lock in monthly payments,” explains Hale.
Yet while there are home shoppers enjoying success in the market, Hale notes that when it comes to the path of homeownership “the hurdles are getting higher.”
Those homebuying obstacles include not only historically high home prices and skyrocketing interest rates, but rising inflation that’s nearing a 40-year high, and an increasingly challenging economic landscape.
Why more homes are sitting on the market
As some homebuyers pull back and shelve their plans, the backlog of homes sitting on the market is growing.
Data for the week ending Oct. 29 shows that the number of active listings on the market are up 40% compared to that same week a year ago, surpassing heights not seen since October 2020.
Yet the number of new listings—of sellers who are just entering the market—are down by 13% compared to this same week a year earlier.
“New listings data suggests that homeowners remain reluctant to sell,” says Hale. “This marks the seventeenth week of year-over-year declines in the number of new listings coming up for sale.”
Why aren’t sellers eager to cash in on high home prices? Because many also have mortgages on their current home with a low interest rate. And they likely don’t want to buy a new home—and apply for a new mortgage at a higher monthly rate.
“With most homeowners locked into mortgage rates well below currently prevailing rates, the number of new listings is likely to remain low,” says Hale.
Intrepid buyers do have some breathing room
In October, homes spent 51 days on market before being snapped up. And for the week ending Oct. 29, homes spent six extra days on the market as this same week last year.
This marks the fourteenth straight week that properties spent more time on the market compared to 2021.
“Buyers who haven’t called off the search as mortgage rates continue to climb will likely have more time to make decisions,” says Hale.
Yet keep that rising interest in mind and don’t wait too long to buy a home, advises Hale.
“[Buyers] may still want to move expeditiously if set on buying in the near term as November’s Fed meeting likely put additional upward pressure on mortgage rates,” says Hale.
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