MINT HILL, NC – While reports of inflation settling down a bit have brought mortgage rates down in the United States, home buyers are not rushing back to the real estate market. Mortgage rates actually dipped below 5% in early August, but they are still up more than 2% compared to this time last year.
Many potential buyers are not rushing back to the market due to skepticism about the inflation numbers. Several buyers are still priced out, due to the higher mortgage rates compared to last year, higher cost of food, higher gas prices, and higher prices, overall.
Home showings are down and more buyers are starting to back out of deals. While this might not be the case with every market across the country, it’s more common than not.
30-year Fixed-rate Mortgages
Currently, the 30-year fixed-rate mortgage is 5.13%, which is down from 5.22%, according to Freddie Mac. However, compared to last year, at the same time, the rate is nearly double. The 30-year fixed-rate mortgage was averaging 2.86% last year at this time.
It has been a roller coaster when looking at mortgage rates this year. While the Federal Reserve tries to combat inflation with rate increases, mortgage rates have gone up quite a bit this year. Four times in 2022, interest rates have been hiked up by the fed in an attempt to keep food, housing, and energy pricing down.
Mortgage rates are not directly tied to the Fed interest rates. However, they are influenced by the Fed rates and typically go up when the Fed raises rates.
Why is Demand for Real Estate Drying Up?
While rates might have dropped a little bit, they are still up quite a bit compared to last year. This is one obvious reason demand is drying up for real estate. Home buyers are not coming back and many are canceling deals due to the economy, as a whole.
Sure, buyers might hear that inflation was 0% in July on TV, but they see their grocery bill is up compared to last year, gas prices are up quite a bit since last year, and the price of just about everything else is up. This has to be factored into a person’s budget when buying a home, especially for the first time.
Around 63,000 home sales contracts fell through during July 2022. That is the highest percentage since March and April of 2020 when COVID-19 first impacted the U.S. Along with deals falling through, homes are sitting on the market longer, and fewer multiple-offer situations are happening.
The real estate market is changing rapidly and many potential buyers are nervous. They fear a recession coming and don’t want to end up with a home they owe more on than it’s worth in a year or two.
Mortgage Applications Are Down
Another easy sign to see that the real estate market is struggling is the lack of mortgage applications. Overall applications fell by more than 2% to the lowest level they have been since 2000. This is a sign that affordability is not within reach for many buyers that could have purchased a home last year.
While the market is certainly cooling off, if home price growth slows down more and mortgage rates don’t go up, it could bring buyers back to the market. Of course, not every real estate market is the same. Some markets are still affordable for many buyers and some are still rather hot.
I would love to be part of your journey when the time is right for you. If you ever have a real estate question or need, or know someone who does, trust that you can turn to me. I will help you make the right move! Anna Granger (704) 650-5707 | firstname.lastname@example.org | www.1stchoicepropertiesinc.com