Mortgage rates surged again this week, leaving price-weary homebuyers still in the market.
Rates on 20-year fixed mortgages rose to 5.66% from 5.55% last week, up more than half a percentage point from two weeks ago, according to Freddie Mac. Although he is lower than the 5.81% registered in June, he remains more than two points higher than at the beginning of the year.
Rising borrowing costs are keeping cash-strapped homebuyers divided. Some have postponed their purchase plans and have chosen to wait for better market conditions, while others are taking advantage of the drop in competition to negotiate with sellers.
“Rising mortgage rates come at a particularly vulnerable time for the housing market as weaker demand has forced sellers to readjust their pricing,” Sam Cater, chief economist at Freddie Mac, said in a news release. .
Buyers have never been more nervous about the housing market since the early 2000s.
Demand for mortgages hit a multi-decade low in August as refinancing and buying activity continued to decline, according to a survey by the Home Loan Bankers Association for the week ending Aug. 26. Eight of the last nine weeks saw a decline in his purchasing activity, down 23% from the same period last year.
Rising borrowing costs are the cause of the slowdown in activity, but rising inventories and slower home price growth may push some buyers back into the market.
There are signs that first-time buyers are coming back. Applications for government mortgages from the Federal Housing Administration, the Department of Veterans Affairs, and the Department of Agriculture have all been popular among first-time buyers, according to the MBA, and have recorded increases in recent weeks.
“Government lending is definitely stronger this year than last year or the year before,” Robert Heck, vice president of mortgages at online marketplace Morty, told Yahoo Money. “It’s not huge, but we definitely see that pickup as an option.”
As buyer demand slows, so do home prices.
Median home prices fell to $435,000 in August, down from last month’s $449,000 and June highs of $450,000, according to Realtor.com.
“Housing prices are rising or accelerating less, or at least starting to slow,” Heck said.
Still, home prices remain 36.9% higher than in August 2019, posing a challenge for first-time buyers. At 5.55% last week, the median monthly payment for a typical home was $2,050, up about 61% from last year.
Keith Gumbinger, Vice President of HSH.com, told Yahoo Money: “The income required to buy a home is 30% to 40% higher than it was at the same time last year. No one is.”
Home sellers adjust price expectations
With more hesitant buyers, sellers are becoming more open to negotiations.
According to Realtor.com, nearly a fifth of the homes on the market saw price cuts in August. Another 92% of sellers accepted buyer-friendly terms last month, agreed to contingent terms such as home inspections and appraisals, and all surveyed sellers agreed to make repairs when asked. said he agreed.
The newfound bargaining power is in numbers. At least 67% of the buyers said they requested repairs in August, compared to 31% for him 6-12 months ago.
“There has been a pretty drastic shift in the market this year, both in terms of infrastructure and certainly housing prices, and the affordability equation has changed quite a bit from where it was earlier this year to where it is now,” Gambinger said. Told. “We are currently in a period of adjustment. [but] We are slowing down now. “
Gabriella is a Personal Finance Reporter at Yahoo Money. follow her on her twitter @__gabriellacruz.
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