Source: Mansion Global —
Rising mortgage rates are cooling the U.S. housing market, sapping recent buyer interest heading into the crucial spring selling season.
Economists, home builders and real-estate agents saw evidence of a thaw in early 2023, when rates declined from over 7% in November to 6.09% in early February. That was enough to lure back some buyers who had adjusted to higher borrowing costs.
Home builders and sellers enticed buyers with concessions such as temporary rate buydowns to make purchasing more affordable. Prices had also slid from their springtime highs in most markets.
But stronger-than-expected economic data in recent weeks has strengthened expectations that the Federal Reserve will stick to its path of raising short-term interest rates in an effort to cool inflation, which could keep borrowing costs higher for longer.
Mortgage rates have moved higher for four straight weeks to 6.65% as of March 2, their highest level since early November, according to Freddie Mac. Mortgage applications from home buyers, meanwhile, slid during the week ended Feb. 24 to the lowest level in 28 years on a seasonally adjusted basis, according to the Mortgage Bankers Association.
Higher borrowing costs are again squeezing affordability. A mortgage rate increase from 6.4% to 7.4% would have the same effect on affordability as a 10% increase in home prices, according to an analysis by First American Financial Corp.
“Buyers are starting to step back,” said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp. “I have never seen home buyers more rate sensitive in my 17 years of running this company.”
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