Sharply higher mortgage rates have caused a sudden pullback in home sales, and now sellers…
There’s no doubt about it: The U.S. housing market continues to run hot. Home shoppers are engaging in bidding wars at the highest clip ever recorded. Inventory remains 48% below pre-pandemic levels. And the annual rate of home price appreciation—19.2%—is just shy of the record set last summer.
That said, the U.S. housing market may finally be showing signs of cooling. At least that’s according to Redfin.
“Fewer people are starting online home searches and applying for mortgages than this time last year, and year-to-date growth in home tours remains far below 2021 levels. An increasing share of sellers are also reducing their prices after putting their homes on the market,” wrote Redfin researchers in a report published on Thursday. “The market still feels hot, but a slowdown in online searches, home tours, and mortgage applications suggests more buyers are getting priced out.”
Why are more home shoppers suddenly dropping out of the market? Redfin points to soaring mortgage rates. As of last week, the average 30-year fixed mortgage rate climbed to 4.67%. Just a month prior, that average rate was 3.89%. Meanwhile, back in December it was 3.11%.
As mortgage rates rise, some would-be borrowers—who must meet lenders’ strict debt-to-income ratios—lose their mortgage eligibility. Others simply balk at the higher monthly mortgage payments.
“Mortgage rates are shooting up at the fastest pace in history, sending the typical monthly mortgage payment for a homebuyer up more than $500 since the beginning of this year,” wrote the Redfin researchers. “As rates quickly approach 5%, we expect their impact on homebuyer demand to change from a motivator—driving a sense of urgency to buy before rates rise further—to a deterrent.”
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