One real estate broker warns that potential buyers are more likely to back out of pending deals because of the 30 year fixed mortgage rate doubling from one year ago and the housing market facing less affordability.
These are scary numbers a little bit. Before, you wouldn't have the ability to back out of a contract, according to The Corcoran Group president and CEO Pamela Liebman, who spoke to Mornings with Maria Wednesday. Nobody would give you a mortgage contingency when the market was on fire and going up, up, up. The broker said that these contract contingencies are being offered because sellers are a little more desperate to get these deals done.
As mortgage rates continue to hit multi-year highs each week and market demand starts to cool, a report from Redfin found that states within the Sun Belt have seen the highest rates of contract cancellations. A lot of homebuyers are back out after feeling the mortgage sticker shock, according to Liebman.
Mortgage rates have gone up more than a percentage point over the past six weeks. The 30 year fixed rate was 6.52%, which is the highest level since mid- 2008, at the end of the September 23 week.
You may have applied for a mortgage two weeks ago, but the cost is much more, and it just makes it unaffordable and people will walk away, Liebman said.
The broker said that the expensive mortgages and home prices have taken a lot of people out of the home-buying market.
Some of the funniest places to buy, whether it's in Vegas or Orlando or Montana, are not so fun anymore because it's gotten a lot more expensive, Liebman said. The inflation all over the place has resulted in disposable income not being what it was. Since home sellers have more listings to compete with, the real estate expert noted that people will try to gain buyer attention by dropping the asking price.
This is a market that saw such incredible price increases during the Pandemic, that it is a double whammy of expensive prices and expensive mortgages, according to Liebman. Something has to be given. Liebman said she does not believe the U.S. is experiencing a housing recession, but she advised those who are active in the market to plan for surprises. We want more people to be able to buy new homes, and we've got a whole new generation that's ready to enter the market. The Corcoran Group CEO said that housing will be fine and maybe a little more balanced, as Chairman Powell said. You just need to talk to someone who knows if an increase in the rate is going to crush you financially.