Mortgage rates continued their dizzying climb toward a decade-high in September, discouraging some potential house-hunters. However, for those who have no choice but to bite the bullet, newly built homes may be an option.
According to Freddie Mac, mortgage rates reached 7.79% on average for a 30-year fixed-rate loan, up from 7.63% the previous week.
Elevated mortgage rates obviously took a toll on the real estate market, with existing home sales dropping for the sixth consecutive month in September to reach their lowest level since 2010, according to the National Association of Realtors (NAR). Pre-owned homes may be the preferred choice for the majority of house hunters since they tend to be more affordable than new construction properties. However, when mortgages are higher than they have been in over 20 years, current homeowners tend to stay put and make do with their living arrangements instead of giving up their comparatively affordable mortgage payments. For the week ending Oct. 14, new listings were down by 4.4% compared with a year earlier. Plus, the total number of homes for sale—which includes new listings and homes already on the market—is down by 2.7% and has been dwindling for 17 straight weeks.
As a result, house hunters may have to turn to new homes despite the premium. New home mortgage applications were 14.9% higher than last September, according to the Mortgage Bankers Association (MBA) Builder Application Survey (BAS).
“Applications for new home purchases decreased over the month but were 15% higher than a year ago, which is the eighth consecutive month of annual gains,” says Joel Kan, Vice President and Deputy Chief Economist for the MBA. “Demand for newly constructed homes remains relatively strong due to the persistent shortage of resale inventory, but increasing mortgage rates are impacting would-be buyers.”
A Resilient Market
The new home market is proving to be more resilient than its existing property counterpart despite 30% of builders raising their prices in September. According to Zonda’s new-home sales metric, 708,457 new homes were sold in September at a seasonally adjusted annualized rate, just 0.2% lower than in August. The September estimate is also 33% higher than last September.
“Dynamics are shifting in the housing market as affordability worsens,” says Zonda chief economist Ali Wolf. “It used to be easy to say the new-home market is outperforming the resale market and the East is outperforming the West. While both are still true, the discussion of today’s sales dynamics has been more market by market, builder by builder, product by product, and price point by price point specific.”
We’ll keep you updated on further developments. In the meantime, if you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
