B4 • Friday, July 22, 2022
THE GARDEN ISLAND
SCARED BUYERS ASSOCIATED PRESS
NEW YORK — Kyle Tomcak was looking for a home for his in-laws in the suburbs around Denver, something priced close to $450,000. Tomcak became dispirited as he lost out to investors fronting cash offers $100,000 over the asking price. Then mortgage rates ballooned, putting his price range out of reach. “All of a sudden, your buying power is less … even though your payments are the same,” he said. Tomcak, 39 and a project manager for a commercial painting company from Aurora, Colorado, had hoped to lock in a monthly mortgage payment of $2,350. His mortgage consultant recommended dropping the maximum price he’d pay for a home, first to $300,000 then to $200,000. Tomcak has abandoned his search for now.. The Federal Reserve has aggressively raised shortterm interest rates to fight inflation, which in turn helps push rates higher for credit cards, auto loans and mortgages. Rising mortgage rates have combined with already high home prices to discourage would-be buyers. Mortgage applications have declined sharply. Sales of previously occupied homes have fallen for five straight months, during what is generally the busiest time of year in real estate.
Housing market chills as mortgage rates, prices rise
historical lows. The average mortgage rate on a 30-year fixed-rate mortgage mostly stayed below 4.5% for most of the last decade, according to data from the Federal Reserve Bank of St. Louis. The financial data firm Black Knight estimates that the rise in mortgage rates has increased a typical borrower’s monthly payment by 44% since the beginning of the year. Since the start of the pandemic, the average mortgage payment has doubled to more than $2,100. Most of the pain is being felt at the bottom of the market: the first-time homebuyer, who often has the least amount of money for a THOMAS PEIPERT / ASSOCIATED PRESS down payment and is trying to make the monthly payKyle Tomcak sits in front of his house in Aurora, Colo., on Monday, July 18, 2022. ment work for their budget. The rate on a 30-year estate data company Redfin not afford the same home as Sales of homes priced below mortgage averaged around shows how much home a they could have a year ago,” $250,000 fell by more than 5.54% this week, according buyer could get with a 30% in June. said Daryl Fairweather, an to mortgage buyer Freddie $2,000 a month mortgage For those who can afford economist with Redfin. Mac; a year ago it was close payment. In Providence, Besides pushing would-be to buy a home even with to 2.78%. The increase in Rhode Island, for example higher mortgage rates, the homeowners to reconsider rates is leaving buyers with an average buyer a year ago their home search, rising housing market slowdown some unwelcome options: could have purchased a rates are also forcing a grow- has a silver lining — more pay hundreds of dollars roughly 4,900-square-foot options. As homes get fewer ing number of buyers who more for a mortgage, buy a home for that size mortgage struck a deal on a house to offers, they tend to linger on smaller home or choose to payment. Now that amount the market longer. The numback out. About 60,000 live in a less desirable neigh- only gets a buyer a 2,200 home-purchase deals fell ber of homes for sale, which through in June, representhas been rising from ulborhood, or drop out of the square foot home. In Seattle, a hotter housmarket, at least until rates ing nearly 15% of all homes tra-low levels since the come down. spring, increased 18.7% from ing market, a $2,000-a-month that went under contract All signals point toward last month, according to a year earlier, according to payment this time last year the Fed continuing to raise would have gotten a buyer a Redfin. That’s up from 12.7% Realtor.com. interest rates, promising lit- modest 1,300-square-foot in May and 11.2% a year ago. The market has changed For more than a decade, dramatically for sellers as tle relief for potential buyers home. That sort of payment potential homebuyers were well. would get them only a at least for the rest of the willing to put up with rising Raymond Martin and his 950-square-foot apartment year. home prices because the wife listed their home in now. Data provided to The Ascost of a mortgage was at Austin, Texas, for sale for “Simply put, people cansociated Press by the real
Average long-term US mortgage rates edge up to 5.54% ASSOCIATED PRESS WASHINGTON — Average longterm U.S. mortgage rates ticked up again this week in a rapidly cooling housing market as the Federal Reserve gears up for what could be yet another bump to its benchmark interest rate. Mortgage buyer Freddie Mac reported Thursday that the 30-year rate rose to 5.54%, from 5.51% last week. One year ago the average 30-year rate was 2.78%. The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, rose to 4.75%, from 4.67% last week. Last year at this time the rate was 2.12%. Most economists expect the Federal Reserve to jack up its borrowing rate another half-to-threequarters of a point when it meets next week. Fed policymakers have signaled that much higher interest rates ma be needed to reign in stubborn, four-decade high inflation. The central bank already raised its benchmark rate by a half-point in May and another three-quarters of a point last month, the biggest single hike since 1994. Rapidly hiking rates risks tossing the U.S. economy into a recession, but it’s also the Fed’s most powerful tool to get price increases back to its 2% annual target. The Labor Department reported last week that its consumer price index soared 9.1% over the past year, the biggest yearly increase since 1981. Labor’s producer price index — which measures inflation before it reaches consumers — rose by 11.3% in June compared with a year earlier.
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$1.1 million in early May. They figured selling the four-bedroom, three-bath house would be “a walk in the park.” The couple had reason to be optimistic. As recently as this spring, it wasn’t unusual for sellers to receive multiple competing offers within hours of listing their home, or for some buyers to agree to pay well above asking price while giving up their right to a home inspection — all to beat out rival bidders. It was very much a sellers’ market. Instead, the Martins have yet to receive a single offer and have lowered their asking price to $899,000. Raymond Martin, 51, noted that shortly before listing his Austin home, a neighbor sold their similar-sized home for $100,000 over the $1 million asking price. The couple are living in a new home in Florida while patiently trying to sell the Austin property. “Clearly, the market’s kind of stalled,” he said. Historically, late spring to early summer is peak home buying season in the U.S., but there are multiple signs that buyers have become discouraged. The number of Americans applying for a mortgage is down significantly from a year ago. Weekly mortgage applications tracked by the Mortgage Bankers Association are down roughly 50% from a year earlier.