Buyers Are Backing Out As Mortgage Rates Top 7%: Redfin | ET REALITY

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Buyers facing high mortgage rates are backing out of their home purchase deals at the highest rate in nearly a year.

In August, almost 60,000 home purchase agreements were canceled nationwide, equivalent to 15.7% of the homes that were contracted that month, according to a new study. report of red fin.

That rate is up from 14.3% in August 2022 and marks the highest percentage since October 2022, when mortgage rates topped 7% for the first time in two decades.

The average interest rate on a 30-year fixed mortgage was 7.07% in August. Last month, rates rose to 7.23%, the highest since 2001, causing the typical home buyer’s monthly payment to increase significantly from last year.

“I have seen more homebuyers cancel deals in the last six months than at any other time during my 24 years of working in real estate. They’re backing out,” said Jaime Moore, a real estate agent with Redfin Premier in Reno, Nevada.

“Buyers are surprised when they see your high rate on paper along with additional expenses for maintenance, repairs and closing costs. Many of them would prefer to back out, even if it means losing their earnest money. Many sellers are also willing to let buyers off the hook because they don’t want to give in to repair requests,” Morre said.

Home prices are not expected to fall

Home prices are high due to competition among buyers for limited inventory on the market.

The median U.S. home sale price rose 3% year over year to $420,846 in August, the largest annual increase since October 2022.

This price was 2.8% below the May 2022 record of $432,780 and is expected to remain elevated for the foreseeable future.

“He Federal Reserve It still has more work to do in its battle against inflation, which means mortgage rates are unlikely to drop anytime soon. As long as rates remain high, homeowners will be reluctant to sell,” said Chen Zhao, economic research leader at Redfin, noting that the lack of homes for sale will keep prices high because it means buyers are competing for a deal. limited housing.

Buyer demand is below pre-pandemic levels, but no longer in free fall

Pending sales decreased 0.6% on a seasonally adjusted basis to 381,192 in August from the previous month. Compared to the previous year, pending sales fell 18.1%.

This figure has remained below 400,000 since the end of 2022, compared to almost 500,000 just before the pandemic.

Pending sales have stabilized as the initial impact of high mortgage rates fades into the background, but high housing costs still keep many buyers on the sidelines, according to Redfin.

New listings increase slightly, but overall housing supply remains at an all-time low

New listings increased 0.8% to 474,239 in August on a seasonally adjusted basis from July.

It is the second small rebound in seasonally adjusted terms, after almost a year of declines. Year over year, new listings fell 14.4%. Most homeowners who feel handcuffed by high rates have already made the decision not to sell, Zhao said.

“It is likely that new listings have bottomed out,” he said. “Many of today’s sellers are putting their homes on the market because they have to, in some cases due to divorce, family emergencies or back-to-office policies.”

Still, the total number of homes for sale hit a record low of 1.3 million in August, falling 1.1% month over month on a seasonally adjusted basis and 20.8% year over year, the largest annual drop since June 2021.

Housing supply is at an all-time low because homeowners feel trapped in their low mortgage rates. For many, selling their home and buying a new one would mean taking on a much higher monthly payment, Redfin said.

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