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Some home buyers are backing away from the market, with a plan to wait six or even 12 months before they resume their search, according to a new survey of 900 real estate professionals conducted by HomeLight. About 35% of real estate professionals reported that they have seen buyers drop out of the market completely.
Higher mortgage rates have buyers spooked. The 30-year fixed-rate mortgage averaged 5.23% this week, compared to 2.96% just a year ago, according to Freddie Mac.
Recent surveys confirm buyers’ hesitation: Mortgage applications recently dropped to the lowest level in 22 years, according to the Mortgage Bankers Association. Also, existing-home sales in April fell for the third consecutive month, according to the National Association of REALTORS®.
Does the departure of so many buyers position the housing market for a collapse similar to 15 years ago? “I would probably say no, in part because incomes are strong and there’s still a shortage of inventory,” Michael Neal, a principal research associate in the Housing Finance Policy Center at the Urban Institute, told MarketWatch.
Mortgage Rates Add to Costs
Some aspiring buyers may need to financially regroup before heading back into the housing market, due to rising home prices and mortgage rates. Climbing mortgage rates have caused new monthly mortgage payments to increase by an average of $258.57, or $3,102.84 per year, according to a survey released in May from LendingTree. LendingTree calculated the difference between average monthly mortgage payments of a 30-year fixed-rate loan in each state based on average annual percentage rates in January and April 2022. It found that mortgage payments have risen the most in California, Washington and Massachusetts. Mortgage payments have increased the least in Ohio, West Virginia and Kentucky, the study found.