DFW Housing and Macroeconomic Analyst Amy Nixon appears on “Making Money” to discuss the impact of big banks investing in residential real estate.
Prospective home buyers remain nervous, faced with high mortgage interest rates and record-high home prices.
new Investigation result The ever-higher costs of buying a home have led to more buyers backing out of last-minute home purchases, according to a survey released by Redfin Inc. About 56,000 home purchases were canceled in June, roughly 15% of homes under contract and the highest rate ever for a June purchase.
The median home sale price rose 4% to a record high of $442,525 in June. At the same time, the average interest rate on a 30-year mortgage was about 6.92%, more than double the pandemic-era low.
Home prices hit new record in June amid sluggish sales
“Buyers are becoming more picky,” says Julie Zubiate of Redfin Real Estate Agents near San Francisco. “The monthly costs of buying a home today are so high that it’s hard to justify not having everything on your must-have list, leading some people to let minor issues put them off a purchase.”
A home in the Issaquah Highlands neighborhood on Tuesday, April 16, 2024 in Issaquah, Washington. (Photographer: David Ryder/Bloomberg via Getty Images/Getty Images)
Still, there are some signs that home prices may be falling soon.
One in five homes for sale have had their prices reduced, the highest on record for June, according to a Redfin report. That’s up significantly from 14.4% a year ago and just shy of the record of 21.7% recorded in October 2022.
There are a variety of driving forces behind the rise in house prices.
Mortgage calculator: See how much rising interest rates will cost you
Years of under-construction created a nationwide housing shortage, then soaring mortgage rates and rising costs of construction materials made the problem worse.
Rising mortgage rates over the past three years are also creating a “golden handcuff” effect on the housing market: Sellers who locked in record-low mortgage rates of less than 3% at the start of the pandemic are becoming reluctant to sell, further restricting supply and leaving eager would-be buyers with few options.
Showing homes available for sale in Austin, TX on May 22, 2024. (Photo by Brandon Bell/Getty Images/Getty Images)
Economists predict mortgage rates will remain high for most of 2024, then Federal Reserve Still, interest rates are unlikely to return to the lows seen during the pandemic, and investors expect only one or two rate cuts this year.
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“Some potential buyers are simply waiting for mortgage rates to come down after the Federal Reserve cuts rates, likely in September,” said Lisa Sturtevant, chief economist at Bright MLS. “With inflation subsiding and the job market remaining strong, a rate cut is all but a given, which means buyers who can wait are waiting.”
A majority of homeowners say they would be nearly twice as willing to sell their home if their mortgage interest rate was 5 percent or higher, according to a Zillow survey. Currently, about 80 percent of mortgage holders have interest rates below 5 percent.
