First, the good news. Mortgage rates have fallen from their October highs of around 8%. Freddie Mac reported the 30-year fixed-rate mortgage was around 6.95% on Friday.
But for buyers eager to buy a home, that might not be enough to improve affordability. Because, as the Wall Street Journal has pointed out, falling rates may have excited buyers but they haven’t moved sellers.
Rather, not that many current homeowners appear motivated to sell. If they have a mortgage rate of around 3% they might not be ready to list their homes for sale and buy another one until rates are a lot lower.
So, if the recent drop in mortgage rates is enough to bring buyers to the market, they may not find an increase in homes for sale. Instead, they are back to competing with one another for available homes, which in the past has resulted in bidding wars and higher home prices.
Consider this: millions of homes were purchased in 2020 and 2021, during the pandemic. Not only are recent purchasers unlikely to sell anytime soon, they have rock-bottom mortgage rates and are not willing to part with them.
Relocating could help
House hunters who are willing to move to a lower-cost city, when available homes are more plentiful, may find the best opportunities.
"Now that we're seeing the beginning of an affordability turnaround, home buyers are still looking for markets where they can capitalize on lower prices," said Realtor.com Chief Economist Danielle Hale. "Even in some of the more expensive markets, we'll see double-digit sales growth as sales start to rebound from their historic lows, helped by mortgage rates which are expected to finally relent."
But sales growth has to be measured against current sales. Real estate experts say they expect 2023 home sales to be the lowest in about a decade.
Photo Credit: Consumer Affairs News Department Images
Posted: 2023-12-19 12:07:42
