A perfect storm has would-be buyers across the country hesitating to enter the housing market. According to Redfin, existing and pending home sales last month sank to their lowest level on record, with the exception of the early months of the pandemic.
Why the strange limbo, though? It all started with the pandemic, at least for the purposes of this story. People could work from anywhere and mortgage rates were lower than ever, so they bought homes. It fueled a housing boom, but one that didn’t last long. Scorching hot inflation pushed the Federal Reserve into action, and the central bank raised interest rates multiple times, indirectly pumping up mortgage rates. So people stopped buying and selling homes.
But here we are, roughly two years of semi-paralysis later, and mortgage rates are falling, but people still really aren’t buying and selling homes. Sales of existing homes fell 1% in August compared to the previous month and 3.1% year-over-year to the lowest level in records dating back to 2012, according to Redfin. (The exception of May 2020, a standstill before the boom.) Pending home sales fell to their lowest level on record, apart from April 2020, too.
Mortgage rates reached a more than two decade high in October last year at 8.03%, and at the moment, the average 30-year fixed daily mortgage rate is 6.15%. That’s a substantial difference worth thousands of dollars yearly. It’s also basically double pandemic lows, but we probably won’t ever get back there. It doesn’t seem to matter either way because would-be buyers are waiting on the sidelines, holding out for lower mortgage rates that might not materialize. Some people seem to think because the Fed will cut interest rates today, mortgage rates will drop, too. But they already have, based on expectation alone.