Homebuyers who were taken aback by last week’s mortgage rates hitting a 20-year high should prepare for more significant changes: This week saw rates climbing even higher, reaching a 22-year peak.
According to Freddie Mac, for the week ending August 24, the average rate for a 30-year fixed-rate home loan stood at 7.23%. This unsettling increase follows last week’s 7.09% rate.
In addition to contending with soaring rates, potential homebuyers are grappling with escalating home prices and a scarcity of listings. In this trio, economist Jiayi Xu’s analysis doesn’t favor buyers in today’s market.
As August draws to a close and both buyers and sellers assess their summers, the pressing question is whether any relief is on the horizon come fall.
Xu provides a glimmer of optimism as the curtain falls on the summer of ’23 in the real estate market.
The trajectory of mortgage rates in 2023 remains uncertain. As the year concludes, predicting where rates will settle is anyone’s guess. However, there’s a glimmer of hope for somewhat more favorable rates in the coming months, with experts speculating that the Federal Reserve, after raising interest rates 11 times to combat inflation, might adopt a wait-and-see strategy at its September meeting. This could potentially curb the recent upward trend in mortgage rates.
While median home prices soared to $440,000 in July, exacerbating the stress on homebuyers, there’s a silver lining: Prices increased by 1.1% for the week ending August 19 compared to the previous year, marking the fourth consecutive week of ascent. Yet, Xu points out that an observable downward trend emerged late in August, offering a glimmer of hope.
Moreover, the likelihood of list prices reaching last June’s record-high median of $449,000 seems unlikely.
The burden of these record-high rates doesn’t solely affect buyers. It also presents a hurdle for sellers wishing to move but constrained by their existing low mortgage rates and homes. Consequently, new listings saw a 5.7% year-over-year decrease for the week ending August 19—marking the 59th successive week of decline. Overall inventory, encompassing new and old listings, fell by 7.2% compared to the previous year.
However, there’s a note of hope for buyers and sellers: Xu notes that this gap is diminishing, with this week’s data showing a 2.4 percentage point improvement over the previous week. This trend suggests a potential break in the housing clouds, hinting that if the narrowing gap in inventory persists, it’s probable that more newly listed homes will be available compared to the record lows witnessed last fall and winter.
Despite grappling with high mortgage rates and home prices, buyers can find solace in not having to rush to the closing table. For the week ending August 19, homes spent an extra four days on the market compared to the previous year. This marks the 57th consecutive week in which the time a typical home spends on the market has increased year over year.
Yet, the gap between the number of days a home spent on the market in 2022 versus 2023 is gradually closing.
