Buyers Wait Despite Dropping Mortgage Rates
Amid the fifth consecutive week of declining mortgage rates, homebuyers began trickling back into the market, albeit insufficiently to revive normalized activity levels.
The average 30-year fixed mortgage rate fell to 7.22% from 7.29% the previous week, as per Freddie Mac’s report. While the decrease offered some financial reprieve for buyers during a traditionally slower period, the future trajectory of rates hinges on the Federal Reserve’s strategy in response to inflation concerns.
Despite the recent rate decline enticing a portion of buyers back, the overall purchase activity remains nearly 20% lower compared to a year ago, signifying lingering apprehension. Adriana Perezchica, president of Via Real Estate Group, highlighted that high rates have fueled financial uncertainties among buyers, limiting their inclination to invest in homes.
Furthermore, constrained housing supply has further muted activity, with homeowners hesitant to trade up and potentially lose their current lower rates. This ongoing scarcity has sustained high home prices, impeding affordability in the market.
Even with a drop in pending home sales, October saw a surge in median home prices by 3.4% year-over-year, reaching $391,800, per data from the National Association of Realtors (NAR). Lawrence Yun, NAR’s chief economist, attributed the limited housing inventory as a major factor obstructing the fulfillment of housing demand, leading to competitive multiple offers and a continual search for homes.
The impact of elevated rates was evident in the market sentiment among homebuilders, as confidence reached its lowest point in a year. The rise in rates, inching closer to 8%, compelled some potential buyers to delay their home purchases, leading to a fourth consecutive monthly decline in homebuilder sentiment.
Buyers face escalating monthly payments, with the national median payment for purchase applicants increasing to $2,199 in October, as reported by the MBA. This financial strain, combined with resistance among buyers anticipating better economic conditions in the upcoming year, has led to a prevailing sentiment of “waiting it out” rather than committing to purchases, according to Perezchica’s observations.