Rates Soar, Applications Wane: This Is Your Housing Update

The average 30-year fixed mortgage interest rate is up to 7.06%, increasing over 50 basis points over the past month, according to BankRate, causing home-sale prices to slide from a year earlier for the first time in more than a decade.

The decrease in home prices are due to climbing rates, meaning sellers are forced to lower their asking price to accommodate those high rates, Redfin says.

According to Redfin’s latest data, the median sale price of homes during the four weeks ending Feb. 26 was $350,246, down by 0.6% from the previous year. This marks the first time since Feb. 2012 that home prices have experienced a decline, except for a prior four-week period study ending Feb. 19 which saw a 0.3% drop.

However, the decline in prices doesn't necessarily equate to more affordability for homebuyers. In fact, the typical monthly mortgage payment for buyers has reached a record high of $2,520, largely due to the increase in mortgage rates.

And, it may get worse. Fed Funds futures are currently pricing in four more 25-basis point rate hikes — meaning mortgage rates can climb much higher than the current 7%.

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While the dip in home prices may seem like a welcome change, the high mortgage rates are still making it difficult for many to afford a home.

Further, although homebuying demand is down from last year, it is up from the third quarter’s low point.

The Homebuyer Demand Index for Redfin, which tracks inquiries about property tours and other services, reached its highest point since September.

Web searches for homes for sale are much higher than they were at their low point, suggesting that prospective buyers may be starting to acclimate to increased rates and costs.

Mortgage purchase applications have dropped to their lowest level since the 1990s, and pending house sales experienced their smallest dip since July.

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