In a slight pullback, mortgage rates dipped from 7.18% to 7.12% this week, as reported by Freddie Mac. However, this marks the fourth consecutive week that mortgage rates have surpassed the 7% threshold, a trend not witnessed since April 2002.
The persistently high mortgage rates are exerting a noticeable influence on both the supply and demand dynamics within the housing market. Many potential buyers find themselves unable to grapple with the elevated housing costs, while existing homeowners are opting to stay put rather than switch to more expensive mortgage options.
The prolonged period of mortgage rates above 7% has led to a stark decline in demand in the housing sector. According to the Mortgage Bankers Association’s (MBA) weekly mortgage application survey, the volume of mortgage applications saw a 2.9% drop for the week ending September 1. Joel Kan, Deputy Chief Economist at MBA, observed, “both purchase and refinance applications fell, with the purchase index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates.”
Further complicating the landscape is the overall scarcity of available properties and a 4.5% year-over-year surge in the median home sale price over the past five years. These soaring home prices create additional barriers for potential entrants into the market.
The market is grappling not only with a dearth of demand but also a decline in buyer interest. Redfin’s homebuyer demand index, tracking requests for tours and other homebuyer services, experienced a 3% decrease over a four-week period, and a 6% drop over the twelve months culminating in September 3.
A recent survey conducted by Fannie Mae underscores the prevailing sentiment. An overwhelming 82% of Americans surveyed in August expressed a negative outlook on the prospect of home purchase, matching the previous all-time high reached in July. Only 18% of respondents viewed it as an opportune moment to buy. Doug Duncan, Chief Economist at Fannie Mae, commented on the grim scenario, stating, “Mortgage rates once again breached the 7% mark in August, hitting a 22-year high and doing no favors for consumer sentiment. Consumers remain pessimistic toward the housing market in general and homebuying conditions in particular.”
In this challenging market, potential homebuyers face a confluence of rising mortgage rates and elevated home prices, leading many to reassess their plans. The combination of limited available properties and the financial hurdles posed by the housing market continues to present a formidable challenge for those seeking to enter the market.
Source: Yahoo Finance