Mortgage rates of 6% help cool housing market for first time in years

Mortgage rates are now above 6% for the first time since 2008. The residential real estate market is finally cooling off from the buying frenzy during the COVID-19 pandemic.

One of the effects is that fewer buyers forgo inspections to win the auction.

“You’d be surprised. Some homes are an Instagram giveaway,” said James Brock of Boston Home Inspectors.

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Brock posted photos on Instagram of surprises his team has found over the years.

Surprises like a door that opens to stairs, a TV antenna mounted on a ladder on the deck railing, an elevator that opens to a toilet, and a toilet inside a shower.

“It was a brand new renovation. They had the toilet in the shower, inside the glass door. You see the shower and toilet are right there,” Brock said.

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He says unexpected problems with decks, foundations, roofs and mold can cost tens of thousands of dollars to repair.

“When a family member asks his uncle to do the plumbing or build a deck, things that aren’t for coding,” Brock explained.

These are all reasons not to forego inspections, he says, as many buyers have done in this boiling real estate market.

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But real estate agents say fewer buyers are now forgoing it as rising mortgage rates cool the market.

“This is the fifth month in a row that we’ve seen sales decline. We’re down nearly 17% from the same time last year,” said Jennifer Wauhob, president of the Houston Association of Realtors.

The inventory is finally starting to increase, but not enough.

“We are still in a low inventory market. Nationally, we are running out of housing units and it will take several years to catch up,” Wauhob said.

This is all due to high inflation and mortgage rates that have risen from under 3% a year ago to over 6% now, as the Fed raised interest rates to curb inflation.

“A 6% interest rate, compared to this time last year, on a $300,000 home is almost a difference of $600 a month,” Wauhob explained.

Keeping many buyers on the sidelines for now.

“Honestly, at this point, you have to keep working hard and keeping your fingers crossed for this promotion,” said Juliana, a hopeful buyer in Miami.

The Fed is expected to raise interest rates again next week, which could mean even higher mortgage rates soon.

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