Warning: Mortgage Rates May Hit 8% as Home Sales Disappoint
The impact of rising mortgage rates on August's home sales. Expert warns of potential 8% rates, affecting affordability for buyers.
In August, the number of homes bought fell by 0.7%, reaching an annual rate of 4.04 million, says the National Association of Realtors. This was below what experts expected, and it's not good news for the housing market.
Lawrence Yun, a housing expert, warns that things could get even worse. He says that mortgage rates, the interest you pay on a home loan, might go up to 8% in the near future. That's a big increase, and it could make buying a home much more expensive.
So, why are home sales not doing well? One reason is higher mortgage rates. When rates go up, it costs more to borrow money for a home, which can turn people away from buying.
These high rates started in June and July when they were just below 7%, but now they've gone above 7%. Plus, there's a chance they might go even higher, especially since the Federal Reserve, the central bank of the United States, is thinking about raising interest rates. When the Fed does that, other rates like mortgage rates can also go up.
Higher mortgage rates not only affect buyers but also homeowners who want to sell. Many homeowners have low-interest rates below 6%, which is much lower than the current rate of 7.18%. So, they're not in a hurry to sell their homes and lose that good rate.
This has caused a shortage of homes for sale. At the end of August, there were only 1.1 million homes available for sale. That's 0.9% less than the previous month and 14.1% less than the previous year. To have a balanced market, we should have at least 6 months' worth of homes for sale, but right now, we only have about 3.3 months' worth.
With fewer homes available, prices have gone up. The median price for homes sold in August was $407,100, which is 3.9% higher than last year. This high price can make it difficult for people to afford homes.
Daryl Fairweather, an economist, thinks that because of high prices and high mortgage rates, people are waiting to buy homes. But as long as rates stay high, prices might not come down.
The Federal Reserve's recent meeting suggests that rates will stay high for a while, which means it could continue to be tough for people trying to buy a home. If mortgage rates go up to 8%, it could make the situation even harder for homebuyers, and we might see even fewer homes sold.
Weak August Home Sales: Sales dropped 0.7%, reaching an annualized rate of 4.04 million, below expectations.
Mortgage Rate Warning: Expert warns rates might hit 8%, raising concerns for homebuyer affordability.
Impact of Rising Rates: Recent increases affect both buyers and sellers, elevating borrowing costs.
Limited Home Supply: Only 1.1 million homes available, down 0.9% from last month, contributing to higher prices.
Buyer Behavior Shift: High prices and climbing rates prompt potential buyers to delay purchases, uncertain about future prices.