As high home prices and rising mortgage rates weighed on the minds of would-be homebuyers, many got cold feet this summer – according to an analysis by Redfin. In fact, almost 60,000 home-purchase agreements were canceled in August, marking an increase from 14.3% a year prior and the highest percentage hike since October 2022 – when mortgage rates rose above 7% for the first time in two decades, according to Redfin.
With some mortgage rates rising to more than 7% and average mortgage payments reaching an all-time high, home sales declined 13% from a year ago, according to a separate report by Redfin. And the total number of available homes for sale dropped 16% as home sellers keep tight grips on the low mortgage rates they secured earlier. But the housing market has been getting a small pump this month. "A few more home sellers have jumped off the sidelines," Redfin said in its report.
The Fed in its September meeting announced a pause in interest rate hikes after having raised rates 11 times to bring down inflation to 2%. But putting the brakes may not bring much resolution to would-be homebuyers as the federal funds rate remains at a 22-year high of 5.25% to 5.5%. And the central bank also hinted it won’t take future interest rate hikes off the table until it's convinced that it's close to reaching its goals.