Record mortgage rates could lead to less demand for housing, according to The Wall Street Journal (subscription).
By the numbers: “Mortgage rates are rising at their fastest pace in 35 years, making home purchases much more expensive than even a few months ago. The average rate on a 30-year fixed-rate mortgage climbed from 3.22% in early January to 5% as of Thursday, according to mortgage-finance giant Freddie Mac.”
- Though record high home prices and record low inventory have prevented many people from buying homes, home sale activity has remained strong because of historically strong demand. Last year, home sales rose to the highest level since 2006.
- However… As mortgage rates go through the roof, some are predicting the housing market will cool off. According to Redfin, demand for home sales has recently began decreasing in some coastal cities, including Los Angeles, Boston and Seattle.
What consumers are thinking: In March, less than one-quarter of consumers said it was a good time to buy a house, according to a Fannie Mae survey.
- That figure is down from 53% a year earlier and represents a record low going back to 2010.
What’s next: Spring is the hottest home selling season of the year, with 40% of annual sales taking place from March to June, according to the National Association of Realtors. Even if high rates reduce demand, some real estate agents predict it will only moderately cool the market because many buyers want to purchase a home before rates go even higher.