Saturday, March 2

Rising mortgage rates slow down home sales in US

SEATTLE, Oct. 19, 2022 — The housing market continued to cool in September, though rebalancing from monumental appreciation is producing vastly different conditions depending on region and metro, according to latest market report. Affordability issues are driving the pullback in activity; steep prices mixed with high and volatile mortgage rates have stunted sales and frozen current owners in their homes, reducing the flow of new inventory. 

Current homeowners are looking at home prices and the mortgage market and deciding to stay put. Among home sellers, 71% are also buyers. Homeowners who either bought or refinanced at record-low rates over the past two years understand that current rates are going to yield a lot less home than they’re currently in unless they seek out a much more affordable area.

At the national level, home values stayed roughly steady from August to September after dropping slightly in the previous two months. The typical U.S. home value is $358,283, up 12.9% from last year and nearly $110,000 (43.5%) above 2019. Of the 100 largest metros, exactly half saw home values rise from August to September. 

“The late-summer mortgage rate reprieve brought a short-lived surge of buyers back into the market, proving that many priced-out home shoppers are poised to buy when homeownership becomes more affordable,” said Jeff Tucker, senior economist at Zillow. “Unfortunately, shoppers this winter are more likely to contend with mortgage rates in the ballpark of 7%, making even this summer’s rising rates look modest by comparison. Still, as many rate-sensitive shoppers stay sidelined, those who forge ahead now will find more options and more eager sellers than anytime since the pandemic began.”

Home values have fallen the furthest from peak levels in expensive and high-growth metros in the Mountain states and on the West Coast; the largest drops are in Austin (-8.2%), San Francisco (-7.9%) and Salt Lake City (-6.8%). Among the 100 largest U.S. metros, the 17 with the largest home value declines from peak levels are in the West. However, owners in these areas should still have significant equity in their homes; home value appreciation since 2019 ranges from 26% in San Francisco to 65% in Austin.