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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsAmericans Hit the Brakes on Home-Buying Activity
(MarketWatch) Far fewer Americans signed deals to purchase homes in February than economists expected, a reflection of the impact of the falling inventory of homes for sale and the rapid rise in mortgage rates.
The 'Index of Pending Home Sales' fell 10.6% in February, the fifth consecutive month in which this measure declined, the National Association of Realtors said Wednesday. The index captures real-estate transactions where a contract was signed but the sale has not yet closed, making it an indicator of where existing-home sales will go in the months ahead.
Pending home sales fell in every region of the country. The South notched the largest decline, with a 13% monthly decrease, while the West had the smallest drop at 7.4%. Pending home sales are a leading indicator for existing-home sales, suggesting that the data for home sales will be lower for another month or two.
But February's contract-signings data also points to the effect that rising mortgage rates had on the housing market. Rates have risen quickly this year, and currently sit half a percentage point higher than where they were at the beginning of January. While mortgage rates remain extremely affordable by historical standards, their fast ascent may have given some buyers cold feet. Those people could move to the sidelines as the spring home-buying season kicks into full gear.
brush
(53,792 posts)it must be because of so many being still unemployed because of the virus.
Hugh_Lebowski
(33,643 posts)It can be a long-ish process to buy a house and even .75% point makes a pretty noticeable shift in ones monthly payment.
You might think you can afford a 200K house at 3% cause it's $X month and then it goes to 3.75% while you're still in the buying process, and now X grows by 15% and you might go ... uh ... I need a 175K house. Cancel the deal.
You'll also get a decent number who are literally ONLY buying because the interest rate was so low it made no sense not to. That calculus can change without that big a change in the borrowing rate.
brush
(53,792 posts)are still pretty low. Many of them wouldn't have even considered buying a year or two before rates dropped so much.
Hugh_Lebowski
(33,643 posts)I went from owing for 25 years to owing for 15 with only about a 10% increase in my monthly payment.
And I took out a couple thousand to catch up with the Feds.
Unless you have a real expensive house and/or a lot of writeoffs in general (neither for me) it doesn't make sense to be paying interest to the mortgage company anymore. Standard deduction is well above my itemized ones (thanks Donnie) even with my old loan, which meant mortgage interest was money down the toilet, so made a ton of sense to switch to 15 year with lower rate.
Ferrets are Cool
(21,107 posts)I think there was two reasons for this decline, which we are now seeing easing.
#1, people were reluctant to let dozens of people walk through their homes not knowing if those people might have covid.
#2, many were waiting on the outcome of the election.
Now that we have a competent PRESIDENT and vaccines are being delivered to millions of Americans, the market is loosing up.
Dream Girl
(5,111 posts)And this is in the Bay Are so definitely not cheap. I just saw yesterday that a house over in Berkeley sold for a million over asking price!
roamer65
(36,745 posts)It may be running out of stream, though.
cinematicdiversions
(1,969 posts)Americans have not hit the breaks on home buying at all.
There are just not any homes for sale at any price.
In my neighborhood you normally would see around 8 to 12 houses up for sale at any one time out of the 300 or so available.
Right now that number is zero houses. and it has been zero houses for about the last six weeks.
Plenty of buyers, (My mailbox is clogged full of unsolicited offers) No sellers to be found however.
Bristlecone
(10,129 posts)WHITT
(2,868 posts)From the very first sentence:
They didn't claim that Americans weren't in the mood to buy houses.
csziggy
(34,136 posts)My mother in law's house was sold last summer to a house flipping company - that immediately turned around and sold it to another house flipping company. They did a lot of cosmetic work on it and now have it for sale for about twice what my husband and his sibling got for it.
My mother's house was on the market for two days when a house flipping company made an offer. My sister didn't want to sell to them so kept the offer on the table for two weeks. No one else would offer as much so she signed a contract with them this week.
Plus, a friend of mine works for a title insurance company - for the last six to twelve months they have been working like fiends to keep up with the sales. She said most of those are to speculators that will flip the houses for even more money.
yewberry
(6,530 posts)Seattle. Prices are still going up. Bidding wars are typical. People are still buying properties sight unseen.
Mortgage rates might mean something where home prices are below $700K. They mean nothing to blue-collar renters in high-demand cities.
Bristlecone
(10,129 posts)Houses in my area are going almost immediately, and for full or more than a asking price.