The housing market is stuck—and isn’t likely to unstick itself this fall.
Pinned down by high mortgage rates, nearing 8%, the market has slowed to a crawl. Buyers can’t afford to buy, sellers are reluctant to sell, and the number of available homes remains dangerously low. That shortage has led to rising home prices again, forcing many would-be buyers to put their American dream on hold.
Home sales have dropped sharply this year as there aren’t many homes available to purchase. Most sellers are also buyers, so they don’t want to give up the ultralow mortgage rates they secured during the COVID-19 pandemic to buy a new home at a much higher rate. So they’re staying put until rates come down. Mortgage rates averaged 7.49% for 30-year, fixed-rate loans in the week ending Oct. 5, according to Freddie Mac. That’s up from 6.66% a year ago and 2.99% two years earlier.
The result? Today’s monthly mortgage payments are about 90% higher than what they were just two years ago, according to a Realtor.com® analysis.* Most of that increase is due to higher rates.
Ironically, high mortgage rates and home prices are a result of the U.S. Federal Reserve trying to bring prices down. The Fed has been hiking its own short-term interest rates since last year in its quest to quell inflation. Generally, mortgage rates move in the same direction as the Fed’s rates. So when the Fed raises rates, mortgage rates often go up.