Per Freddie Mac:
After little movement the last few weeks, mortgage rates rose again on the back of increased economic activity and incoming inflation data. The housing market is incredibly rate-sensitive, so as mortgage rates increase suddenly, demand again is pulling back. The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home.
Some key takeaways:
- Rates have begun to move upward again. Do not fall into the Vegas mindset assuming that your luck will change and you can make up lost ground. If you have an imminent upcoming transaction, plan on upward movement. You may get lucky and hit the market during a pause, but any major downward movement is not likely any time soon.
- The upward rate movement is turning off many previously active buyers who are moving to the sidelines. The fact that this is in the historically most active season. Many prospective buyers have no choice but to pull back as they have leases to renew and with tight rental markets in many markets, landlords are less flexible to month-to-month or early terminations. The unknowns are also scaring families who need to ensure that their kids are set for school in the fall.
- This environment continues to put downward pressure on home prices. Stubborn lack of supply is buffering the impact, but as I mentioned before more and more buyers are leaving the market by choice or because they can not qualify at a higher rate. Because most housing market indicators are trailing indicators, it is hard to predict the how fast the fewer buyers will have on the housing market, but assume things will correct eventually.