On Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 75 basis points to a 1.5% to 1.75% range, the biggest increase since 1994 as it tries to tame rising inflation, which has reached a 40-year high.
Compare that to the current environment: At 6% that same mortgage would cost approximately $2,398 a month , a 42% increase in overall monthly repayments on the lower rate. “The cost of borrowing is becoming more expensive, particularly for those with variable rate products,” he said. Conversely, those who locked in at a 30-year rate last year at more than half the current rate will be breathing a sigh of relief.
About half of buyers are pressing pause on their plans to buy a home, choosing to wait for six to 12 months before restarting the process, according to a recent survey of 900 realtors by real estate tech startup HomeLight. Rising rates aren’t all bad news, he added. “Less demand for housing could help to alleviate some of the housing supply crunches that are being felt across the country. Though it’s unlikely that home prices will majorly slump, an increase in housing supply will likely significantly slow home price growth and give would-be buyers more housing options to chose from.”
He said the business has had to downsize its staff as “mortgage rates increased faster than at any point in history. We could be facing years, not months, of fewer home sales, and Redfin still plans to thrive.”
Why wait? See lofty_ai
Sounds like buyers are willing to wait for as long as it takes for sellers to align their expectations with reality.