Renters are expected to get hit with higher rental rates, according to Justin Barry, partner at Morris, Manning & Martin. It’s not just the buyers that are getting sidelined. The combined impact of higher rates and higher home prices has driven the cost of financing the typical listed home up more than $250 or 12.4% from a year ago and up more than $1,100 or 96.5% from June 2020, nearly doubling the cost in three years, Hale noted. High rates have made affordability exceedingly challenging, and low inventory in return increased competition, especially at lower price points. Permitting data suggests future multifamily supply is slowing and developers of such projects are highly sensitive to high interest rates.įor now, first-time homebuyers are the most impacted group as higher mortgage rates cut into their purchasing power. Though housing starts boomed in May and fell slightly to a seasonally adjusted 1.43 million units last month, supply is mostly coming from multifamily rental construction. “A large swath of outstanding mortgages has below-market rates, and this has led to a restriction in the supply of existing homes for sale,” Ruben Gonzalez, chief economist at Keller Williams, said.ĭuring his press conference with reporters, Powell acknowledged that the housing market has cooled due to high rates, but also said it “has a ways to go” before home prices fall. Hale expects the number of home homes for sale to decline this year, and continue to be a damper on home sales. Year-over-year, sales dipped 18.90% from 5.13 million in June 2022. “Higher mortgage rates change the trade-up calculation for existing homeowners and are keeping as many as 1 in 7 out of the market because they don’t want to give up their existing low rate,” Danielle Hale, chief economist at noted.Įxisting home sales dropped to a seasonally adjusted annual rate of 4.16 million in June from the previous month. “High mortgage rates triggered by the Fed’s policy have caused more sellers to sit on the sidelines given the large differential between the rate they enjoy on their current home compared to the possible interest rate on any home they may purchase today,” said Marty Green, principal at Polunsky Beitel Green, a law firm for residential mortgage lenders.ĭata from Redfin showed that about 92% of homeowners have a rate below 6% and a record 60% of mortgage holders have lived in their home for four years or less – further contributing to the supply shortage.
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