Number of Buyers Backing Off? Maybe Half
If rising costs didn’t deter hopeful home buyers, rising mortgage rates might. Realtor survey estimate: About 50% of buyers paused plans at least temporarily.
NEW YORK – The Federal Reserve raised the benchmark interest rate by 75 basis points this week to a 1.5% to 1.75% range, the biggest hike since 1994, as it tries to contain inflation, currently at a 40-year peak.
Eric Finnigan at John Burns Real Estate Consulting tweeted as mortgage rates rise from 3% at the start of this year to 6% now, it effectively prices out 18 million households.
“The cost of borrowing is becoming more expensive, particularly for those with variable rate products,” says Bankrate.com analyst Mark Hamrick.
While the latest mortgage rate increase was baked into the expected 75-basis-point raise, Holden Lewis at personal-finance site NerdWallet says interest rates will continue to climb.
About 50% of buyers are pausing their home-purchasing plans, opting to wait six to 12 months before resuming the process, according to a survey of 900 Realtors by real estate tech startup HomeLight.
And earlier this month, the Mortgage Bankers Association reported that the Market Composite Index hit a 22-year low.
The Fed’s move did not surprise analysts, as Ben McLaughlin at online savings platform SaveBetter.com said the agency was meeting expectations with its third consecutive hike in the Fed Funds target rate since March 2022. “Markets have been rattled lately, so the Fed must walk a narrow path to avoid a jolt so pronounced that it risks tipping the U.S. economy into recession,” he says.
Source: MarketWatch (06/16/22) Fottrell, Quentin
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