Rising interest rates for mortgages are posing challenges for both homebuyers and sellers.
“We’ve seen a huge slowdown in demand. In fact, I’m talking to real estate agents who are canceling open houses because they say nobody is showing up right now,” said Diana Olick, who has covered real estate for CNBC for two decades.
Average long-term U.S. mortgage rates saw their biggest one-week jump in 35 years, as the Federal Reserve this week raised its key rate by three-quarters of a point in an attempt to tame inflation. The hike was the biggest at time since 1994, sending 30-year mortgage rates to 5.78% this week, from 5.23% last week. Mortgage rates have not been this high since November 2008, during the housing crisis.
“For first time buyers, they’re definitely being sidelined,” Olick said, adding that mortgage rates have been rising since the beginning of the year. “The affordability has weakened dramatically.”
The rising rates come as home prices, which have been higher than normal, are starting to cool off, Olick said. Home prices typically rise 4% to 6%, year over year, but had gone up 20% from a year ago, she said.
“The sky is no longer the limit for homeowners. And that’s what real estate agents are having to tell them,” Olick said.
While demand for homes is still high, supply is still low but starting to rise.
“But there is more supply coming on the market and houses are sitting longer. That means if you’re desperate to sell, don’t put that high sky-high price on the house. Price a little lower. Perhaps you’re not going to get bidding wars.”
The Associated Press contributed to this story.
