US mortgage rates have hit nearly 7%, causing a shift in the housing market’s dynamics among affluent buyers. Contrary to expectations that falling interest rates would bring sidelined homebuyers back into the market, rates have risen since September, climbing 5 basis points to 6.84% per Freddie Mac.
Industry experts attribute this trend to the Federal Reserve’s rate cut and President Donald Trump’s return to the White House, as his policies are expected to be inflationary. While the Fed is likely to make one more rate cut in December, it is not planning further reductions. This has led to a decrease in home sales and pending contracts, as buyers adjust their expectations.
Luxury sales, however, have seen a 12.8% increase year-over-year in Houston, driven by lower mortgage rates. Despite this uptick, buyers are still waiting for an extended period before making decisions. Experts expect this trend to continue, with consumers adjusting to new market conditions.
A recent survey found that buyer sentiment varies along partisan lines, with more Republicans expressing optimism about the economy and Democrats fearing its direction. Gen Z respondents also show increased enthusiasm for purchasing a home.
However, industry data suggests 2024 will be the worst year for home sales since 199, and inventory is only now rising to pre-pandemic levels. This has little downward pressure on pricing, suggesting that relief on affordability is unlikely in the short-term.
Source: https://www.mansionglobal.com/articles/mortgage-rates-keep-going-up-why-some-are-shrugging-e8b9323d