HOUSTON – (By Dale King, Realty News Report) – Mortgage rates that began to skyrocket more than a year ago are creating an affordability obstacle for people looking to buy and/or sell their homes in the coming months, says a newly released report on the situation.
Mid-April – the segment of the year considered to be “the best time to sell your home” – has just begun. But those just-mentioned high mortgage figures are hindering potential sellers from entering the real estate market, says a survey released Monday by Realtor.com and HarrisX.
In fact, the research report calls the elevated mortgage levels “a major issue” that’s holding back potential home sellers.
The report determined that many folks looking to sell their homes in the coming 12 months are also planning to buy. Eighty-six percent of those planning to put the old domicile on the block hope to buy a new dwelling within a year or so, says the Realtor.com/HarrisX assessment.
“And because most of these sellers will be taking on a new mortgage, this creates a major affordability hurdle,” the report said. “In fact, 82 percent of these seller-buyers feel ‘locked in’ by the currently low mortgage rate they would have to forfeit if they buy another home and acquire a new, much higher mortgage.”
“As a result,” the research says, “more than half of seller-buyers (56 percent) planning to sell in the coming year are waiting for rates to come down, while 25 percent need to sell soon for personal reasons.”
Not all is gloom and doom, says Realtor.com Chief Economist Danielle Hale. “One positive aspect that came out of the pandemic was historically low mortgage rates – and many people took advantage of this opportunity to buy their first home, upgrade to a more expensive residence or refinance the home they were in.”
“Unfortunately, this comes with a bit of a Catch-22,” she noted, “as homeowners who locked in a 30-year fixed rate in the 2 to 3 percent range don’t necessarily want to give up that financially advantageous number in exchange for a rate in the 6 to 7 percent range.”
Last week’s Freddie Mac survey showed the 30-year fixed-rate mortgage averaged 6.27 percent, up from 5.0 percent at this time last year. Mortgage rates have been trending down slightly in recent weeks.
“Mortgage rates decreased for the fifth consecutive week,” said Sam Khater, Freddie Mac’s Chief Economist. “Incoming data suggest inflation remains well above the desired level but showing signs of deceleration. These trends, coupled with tight labor markets, are creating increased optimism among prospective homebuyers as the housing market hits its peak in the spring and summer.”
The good news for sellers is that they have built up a lot of equity in their current homes. Eighty-five percent of potential sellers are happy with the amount of equity they are sitting on, says the newly released survey. Specifically, 74 percent estimate they have more than $100,000 in home equity and 20 percent estimate that figure to be more than $300,000.
Despite higher mortgage rates, sellers still have high expectations for their home sales, in many cases, even higher than potential sellers who were surveyed in August of 2022. Thirty-three percent of potential sellers said they want to take advantage of the current market and think they can make a profit.
Here are some expectations from the shifting marketplace:
- 43 percent expect to get their asking price (up from 27 percent in 2022)
- 37 percent expect to have an offer within a week (compared to 33 percent in 2022)
- 35 percent expect buyers to be willing to forgo contingencies like inspections and appraisals to make the deal (compared to 30 percent in 2022)
- 34 percent expect an all-cash offer (up from 22 percent in 2022)
- 31 percent expect to get more than their asking price (compared to 30 percent in 2022)
- 27 percent expect a bidding war to take place (compared to 32 percent in 2022)
“Given the changing housing market, it’s important for buyers and sellers alike to have realistic expectations heading into a home sale,” said Hannah Jones, Realtor.com economic data analyst. “By understanding the local market, sellers can make sure that they’re pricing their home well to help ensure a quick sale and avoid a home that lingers on the market.”
April 18, 2023 Realty News Report Copyright 2023
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