September 29, 2023

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Homebuyers Can’t Get A Rest As Mortgage Rates Rise Nearly 7%

Mortgage rates jumped close to 7% this week, adding to the worsening housing conditions for buyers.

The 30-year fixed mortgage rate rose to 6.79% from 6.57% in the previous week, according to Freddie Mac, on expectations that the Federal Reserve will raise interest rates again. For the past eight months, rates have stayed between 6% and 7% with few signs of a significant downturn anytime soon.

Rising prices — along with still-high home prices — were a blow to homebuyers’ affordability and convinced many homeowners to delay listings — worsening inventory conditions in a market starved of supply.

“Both buyers and sellers have backed out of the market because mortgage rates are so high,” Daryl Fairweather, Redfin’s chief economist, told Yahoo Finance. They made housing more expensive to buy. Homeowners who were able to lock in mortgage rates at 3% a little over a year ago don’t want to part with those rates and don’t sell.”

“So we see fewer transactions this time of year,” she added.

The dearth of deals appeared in other data this week.

For example, the share of applications for a home fell 3% last week compared to the week before, according to the Association of Mortgage Banks. reconnaissance. Overall, buyer demand is down 45% from the same week a year ago.

“Although there has been a steady influx of buying demand around rates in the low to medium range of 6%, this demand is likely to weaken as prices approach 7%,” Sam Khater, chief economist at Freddie Mac, said in a statement. The “booming economy” has convinced many market watchers that more Fed increases are on the way.

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A separate study by real estate analytics firm Altos Research found that the number of pending sales that must be completed in June and July reached 398,000 last week, unchanged from the previous week. That’s even with the stock rising 2% or the week ending May 29th.

said Mike Simonsen, founder of Altos Research books in a blog post.

House for sale in the Bucktown neighborhood of Chicago, Illinois. (Credit: Scott Olson/Getty Images)

The high rates have also left a growing percentage of homeowners reluctant to list this spring. Those who have put their homes on the market may find they have the upper hand against buyers.

“We only had the house on the market for two days, and right off the bat we had four buyers within the first day to list it,” Monty Miner, real estate agent for Ironwood Fine Properties, told Yahoo Finance. “This is a good sign that the place will sell at or even above expectations, but buyers won’t get a chance to negotiate when competition is high.”

That is if buyers can find a home to buy.

For example, an index measuring the volume of contracts signed in April was unchanged from March, even though spring is the busiest time to list and sell a home, according to the National Association of Realtors last week.

Similarly, the number of homes foreclosures this week was down nearly 5% from the previous week and down 14% from the same time a year earlier, according to Altos Research.

“We know that demand for housing has outpaced supply all year. But mortgage rates have really jumped this week… There are signs that some buyers are holding off,” Simonsen wrote. “If prices stay… will the little green shoots of market power fade quickly?”

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Gabriella is a personal finance correspondent at Yahoo Finance. Follow her on Twitter @employee.

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