In September, mortgage rates reached their highest levels since 2000, and they could inch upward in October.
Intrepid home shoppers might discover that more sellers are reducing their asking prices, but most would-be buyers will struggle to find suitable places to make offers on.The Federal Reserve’s monetary policy committee met Sept. 19 and 20. Its updated summary of economic projections included Fed members’ forecasts about the direction of short-term interest rates for the next three-plus years.
The projections surprised the mortgage market. The Fed members signaled that they expect to keep short-term interest rates higher for longer than the mortgage market had expected. Mortgage rates played catch-up after the Fed meeting, with the 30-year fixed-rate home loan rising past 7.25% for the first time since late 2000.Rising mortgage rates chip away at home affordability, which has been declining since early 2021.
Mortgage rates have gone up five months in a row, making mortgage payments higher for a given loan amount. The impact on affordability has motivated almost 40% of home sellers to reduce their initial asking prices, according to Mike Simonsen, president of real estate analytics firm Altos Research, in a weekly commentary posted to YouTube. In spring, when mortgage rates were lower, about 30% of the homes on the market had taken a price cut.
Home buyers might rejoice at the news that more sellers are reducing their asking prices. But the lack of properties to choose from remains a drag. According to the National Association of Realtors, 1.1 million homes were for sale at the end of August, the latest available data. In August 2019, a closer-to-normal, pre-pandemic market, 1.83 million homes were for sale.Fannie Mae and the Mortgage Bankers Association disagree in their mortgage rate forecasts for the last three months of the year.
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