Is the Housing Market Backsliding? Mortgage Rates Jump to a New High—and That’s Not Even the Worst News

All eyes are on mortgage rates these days as they zigzag between bad and awful. And they may have just reached utter misery level.

Rates for a 30-year fixed-rate mortgage hit 6.96% the week of July 13, according to Freddie Mac. That’s the highest it’s been since Nov. 22 of last year and is a significant jump from last week’s 6.81%–which was already the highest level of 2023.

But believe it or not, interest rates pushing 7% might not be the biggest hurdle today’s homebuyers are facing.

“While affordability continues to challenge buyers, the lack of inventory is likely to be the key issue for eager buyers as it keeps upward pressure on prices while limiting buyer choice,” notes Danielle Hale, chief economist for Realtor.com®, in her weekly data analysis.

To help buyers and sellers get the temperature of where the market is—and where it’s going—here’s what the latest real estate statistics are saying for the week ending July 8 in our column “How’s the Housing Market This Week?”

Home prices jumped from May to June

As of late, the real estate market seems to add a dash of insult to each mortgage rate injury.

Not only are mortgage rates more than double what they were two years ago, but the typical asking price for a home has fallen less than 1% since last June’s all-time high of $449,000.

So, even though home prices have headed south for the past five weeks in a row, they’re doing so at a painfully glacial pace for buyers. Home prices were 0.2% lower than last year for the week ending July 8. (Last week, the listing price dropped by 0.6% year over year.)

“Despite the year-over-year dip, June’s median home list price was $445,000, up slightly from May’s $441,445 price,” says Hale.

The home supply problem

As for why home prices simply won’t drop significantly, look no further than the housing market’s ongoing chicken-and-egg problem of tight inventory.

High mortgage rates have would-be sellers sitting on the sidelines—enjoying their low mortgage rates from years past—instead of listing their homes. And without a surge of supply, home prices likely won’t come down significantly anytime soon.

“The matchup between buyer demand and limited for-sale inventory keeps prices afloat,” explains Hale.

As a result, potential homebuyers are experiencing another grim real estate data point: Active inventory fell 5% for the week ending July 8 compared with the prior year.

Active inventory includes both old and new listings, but fresh listings have now surpassed a year of declines. They are down for 53 weeks in a row, and by 27% from one year ago for the week ending July 8.

Strangely enough—despite the limited supply of homes to choose from—buyers are taking their sweet time making an offer: Homes lingered on the market for 13 extra days for the week ending July 8. This marks 51 weeks it’s taken longer to sell a home compared with the same week a year ago.

The good news about inflation and mortgages

The Federal Reserve has been on an inflation-taming tear for 16 months now, which might have just paid off somewhat.

Inflation fell to its lowest annual rate in more than two years during June. And the consumer price index (CPI), which measures inflation, was up only 0.2% in June.

“Low inflation means low mortgage rates,” said National Association of Realtors® Chief Economist Lawrence Yun regarding the inflation report. “Therefore, decelerating consumer prices could steadily lift home sales and increase home production in a few months. CPI rose by 3% from one year ago, which is much lower than the 8% to 9% hikes of last summer and is the slowest gain in over two years.”

And that’s not the only glimmer of hope on the economic horizon.

“The job market’s ongoing resilience has enabled buyers to remain active in today’s market, despite the high cost of homeownership,” notes Hale.

Where buyers can find relief

Buyers who are active despite affordability headwinds need to, well, buy homes. So where can they turn if not to existing homes?

Fresh listings of brand-new homes.

“Builders are enjoying renewed energy in the new-home side of the market, which saw sales jump 12.2% in May as buyers pivoted their energy toward new construction amid dwindling existing-home stock,” said Hale.

The post Is the Housing Market Backsliding? Mortgage Rates Jump to a New High—and That’s Not Even the Worst News appeared first on Real Estate News & Insights | realtor.com®.