The consequences of the high home mortgage rates were supposed to mean a shift from a sellers’ to a buyers’ market.
It was just this spring that sellers could expect multiple offers in hot markets. Now, real estate agents have to tell what few sellers are out there to expect their homes to sit for a while.
According to residential real estate brokerage Redfin Corp. RDFN, mortgage rates are now the highest they’ve been in 14 years and, in many cases, over 6%.
"This is the sharpest turn in the housing market since the housing market crash in 2008," Redfin Chief Economist Daryl Fairweather said.
After a quick dip into the low 5% range in mid-summer, the national real estate mortgage rate has jumped to 6.47%. This came just a couple of months after many believed the market would turn in another direction for the third time this year.
But much like the pandemic made homeowners cocoon and spend their extra money on home improvement rather than move, the current interest rate malaise is making people sit on their homes again, even if they’d like to cash in.
The reason is simple. Homeowners with interest rates below 3.5% have no interest in buying a new home at a higher interest rate.
“I like to call it the golden handcuffs of mortgage rates,” First American Financial Corp. economist Odeta Kushi told The Wall Street Journal. “You’ve got existing homeowners who are sitting on these rock-bottom rates, and what is their financial incentive to move and lock into a rate that’s potentially as much as three percentage points higher than what they’ve locked into?”
Greenville, South Carolina, has been one of the medium-sized Southern cities that saw exponential growth in the past 10 years and as recently as March, a home could be sold there in hours — not days — with multiple offers for homeowners to ponder. And as people flock to booming towns like Greenville from the north to take advantage of a robust job market, there’s now no room at the inn.
“The only people who are selling their home right now are the ones who have to. They either have to relocate, they’re having a baby and need a bigger house, or they’re getting divorced,” said Nest Realty agent Lisa Briganti, who oversees her own Briganti Properties in Greenville. Like many area residents, Briganti is a willing transplant from the north. The Connecticut native has been selling homes in the Greenville area for eight years and has seen the market go from red hot to “Where do I live?”
“I think people have buyer fatigue and they’re just tired,” Briganti said. “They’ve been looking at homes all year and getting outbid by multiple offers over the asking price. Those same people are now priced out of the market because the rising interest rates mean they can only afford 30% less than they could six months ago.”
Last week, Federal Reserve Chairman Jerome Powell said the housing market needs to go through a correction after jumping to increasing prices during the pandemic. He says he hopes the correction will make homes affordable again. But with little activity in a market where homeowners refuse to give up their low interest rates, buyers will find few options as those prices come down.
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