Home mortgages at 5% appear to be a trigger point for the market.
Mortgage rates ticked down to 4.99% last week but are still two full percentage points higher than a year ago.
Online searches, requests for tours and agents’ help, and mortgage applications rose as mortgage rates fell below 5%, according to a new report from real estate brokerage Redfin.
Redfin deputy chief economist Taylor Marr said in prepared remarks, “Homebuyers may catch a break this month as rates have come down nearly a point from the recent high on fears of a recession.”
Sellers’ Frustrations Tangible
Volatile rates are both confusing and exciting buyers and sellers.
The Wall Street Journal personal finance reporter said Monday on her podcast, “So those bidding wars that you heard about. Those offers over ask that you just mentioned. Yeah, that’s kind of a thing of the past right now. That’s not really happening for a lot of sellers in many markets.
“And so, these homeowners are having to come to grips with the reality that they may not get the same price that their neighbor did just a few months ago.
“And some sellers aren’t taking that very well. They’re frustrated, they’re confused, they’re disappointed. And some people are actually coming to the place where they’re just happy to get any offers on their home.”
Buyers Have ‘Irrational’ Fear
Erin Sykes, Nest Seekers International’s chief economist, tells GlobeSt.com, “Because of the constant chatter regarding rising rates, many potential buyers are (irrationally) scared of entering the market.”
“People have become so paralyzed that they won’t even contact a lender to get a preliminary read on a mortgage pre approval. It’s mind-boggling to her how they are deciding an outcome before even doing their own research.”
Freddie Mac began tracking the national average 30-year fixed rate in 1971 and since then it has seen rates as high as 18.27% and a historical average rate of 7.77%. Today, the national average is 5.13%. This was down from a 2022 high of 5.81% but up from 3.11% at the start of the year.
So far, this rebound in rates has not moved through to actual home sales, Redfin reported. Pending sales in July posted their largest decline since May 2020 and new listings fell 11% from a year ago, the largest decline since June 2020.
An owner of a second home in Arlington, Va., said Monday, “I just had my fourth open house in the last month – lots of ‘interest’ (haha) – but no offers, alas. While the market has shifted and it is slower, I probably need to drop the price. I’m not greedy.”
Home Sellers Should Prepare to Negotiate
David Druey, Centennial Bank’s Florida regional president, tells GlobeSt.com, “With mortgage rates fluctuating, prospective buyers should remain within budget and not stretch beyond it as the market dynamic is moving.
“Mortgage rates may drop by Q1/Q2 of 2023 which will create more activity in the housing market and in turn, home values will increase (again) in places like Miami where there is robust demand.
“For home sellers, it is best to determine a home value that you believe is correct at the current market rate and prepare for negotiations, which have not been typical in recent quarters.”