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Mortgage rates have continued their upward trajectory, marking a third consecutive week of increase—a disappointing development for prospective homebuyers who had hoped for more affordable real estate prices as summer approaches its end.
According to data from Freddie Mac, the average interest rate for a 30-year fixed-rate mortgage climbed to 6.96% during the week ending August 10. This figure stands in stark contrast to the previous year's average of 5.22%, and it's more than double the rates observed two years prior, which were at a modest 2.87%.
The timing of these nearly 7% rates coincides with a rise in inflation numbers for July, sparking concerns that the Federal Reserve might opt to raise benchmark rates in its upcoming September meeting.
Regrettably, the news doesn't end here for potential homebuyers. In the week concluding on August 5, they also had to grapple with heightened home prices, exacerbating the challenges of an already intricate real estate market landscape.
Given the simultaneous surge in home prices, mortgage rates, and inflation, it's vital to decipher the implications for both homebuyers and sellers. Let's delve into the latest real estate statistics and glean insights from the evolving housing market in this week's edition of "How's the Housing Market This Week?"
Home Prices Forge Ahead
Despite a promising dip in list prices during July, with figures descending from $443,900 to $440,000 compared to the previous year, recent trends indicate a renewed upward trajectory. For the week ending August 5, list prices crept up by 0.7% in contrast to the corresponding period last year.
However, an analysis of the housing data by Realtor.com® economic research analyst, Hannah Jones, lends perspective. Jones forecasts that 2023 will likely not witness the emergence of new peak home prices surpassing the record set in June 2022 at $449,000.
While prices have indeed resumed their ascent, they are unlikely to mirror the peaks reached in the summer of 2022. Nonetheless, the overarching challenge of affordability for homebuyers remains a pressing concern, according to Jones.
Declining New Listings Persist
The number of new listings, a pivotal metric indicating the influx of homes for sale, remains on a downward trajectory, registering a 14% decrease compared to the prior year. Many sellers are holding off on listing their properties in anticipation of a decline in interest rates, which could potentially yield more favorable prices.
The descent in new listings has persisted over the past 57 weeks. Yet, a glimmer of optimism emerges as the decline seems to be moderating. Jones observes, "The gap is starting to shrink." Nevertheless, the aggregate active inventory—comprising both new listings and pre-existing listings lingering on the market—remains 9% lower than year-ago levels.
The current week marks the seventh consecutive decline in homes available for sale relative to the same period in the preceding year. This dynamic underscores the existence of resilient individuals prepared to overcome obstacles such as elevated interest rates and surging home prices.
Jones highlights the influence of existing homeowners opting to retain their properties, thereby curbing the growth of overall inventory. She anticipates a 5% reduction in inventory for 2023 compared to 2022. Amidst these trends, new construction offers an alternative avenue, as new-home sales continue to surpass the lows witnessed a year ago.
Extended Market Presence Benefits Buyers
A glimmer of positivity emerges for potential buyers: Homes remained on the market for seven additional days during the week ending August 5, in contrast to the same period the previous year.
This trend favoring buyers has shown remarkable consistency, stretching over more than a year (55 consecutive weeks) where the average time homes spend on the market has exceeded figures from a year prior.
This extended market presence potentially benefits buyers in two ways. Firstly, homes lingering on the market for a more extended period may encourage motivated sellers to entertain lower offers. Secondly, this trend could indicate a decline in the intense bidding wars that characterized the market in previous years, providing some respite for buyers.
Jones offers an insightful perspective, suggesting that this might signify the market transitioning into a new equilibrium. She concludes, "It could indicate that the market is finding a new normal," wherein homes remain on the market for fewer days than before the pandemic but longer than the frenzied days of the market's peak.
In essence, the persistent ascent of mortgage rates casts a shadow of uncertainty over the real estate landscape, prompting both homebuyers and sellers to navigate a complex and evolving market. As potential buyers face affordability concerns and sellers strategically time their listings, the housing market continues its dynamic dance, offering glimpses of optimism amidst ongoing challenges.
Find the original article here: https://www.realtor.com/news/trends/mortgage-rates-rise-for-third-week-straight-but-thats-not-the-worst-news/