With mortgage rates now nearing 5%, many aspiring home buyers may have reached the top of what they can afford, especially as 40-year-high inflation affects the threshold for them.
As a result, the number of sellers dropping their asking price is growing at a faster clip than in the recent past. About 12% of homes for sale had a price drop during the four weeks ending April 3. That marks a jump from 9% a year ago.
Home prices are well above levels from a year ago. The average borrower is paying about 40% more than they would have for the same home a year ago on a monthly payment due to higher mortgage rates and higher home prices, according to the National Association of REALTORS®.
More consumers believe that mortgage rates and home prices will rise further, according to a monthly consumer sentiment index from Fannie Mae. “If consumer pessimism toward homebuying conditions continues, and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast,” Mark Palim, vice president and deputy chief economist at Fannie Mae, wrote about the consumer sentiment index’s findings.
However, some buyers may see an opening in the market. They may want to rush ahead of further mortgage rate increases or may see an uptick in new listings.
Source: “Rising Mortgage Rates Are Causing More Home Sellers to Lower Their Asking Prices,” CNBC (April 7, 2022)
