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Miami Herald
18 hours ago
- Business
- Miami Herald
High mortgage rates are still impacting home sales in 2025
High mortgage rates are still impacting home sales in 2025 Spring usually brings with it open houses, moving vans and new mortgages. But for many would-be homebuyers, this year's homebuying season felt more like Groundhog Day. Ever since interest rates for mortgages climbed from 3% following the COVID-19 pandemic to over 6% starting in late 2022, home sales in the U.S. have cooled to a level not seen in decades. Over the past 30 years, it's been typical for more than 5 million homes to change hands annually, according to data from the National Association of Realtors. In 2024, however, barely 4 million homes were bought and sold - the fewest since 1995. Not only have "for sale" signs become more rare, but there are now fewer prospective homebuyers checking out properties than in prior years - some perhaps discouraged by the current state of the market. Homes are lingering on the market far longer than they have in recent memory as well. In January, residential real estate company Redfin reported that homes took longer to sell than any time since 2019. Tariff uncertainty will likely extend that timeline even further, at least in the short term. Although home prices are falling in some markets - particularly in parts of California, Florida and Texas - prices are still climbing in most other residential markets in the U.S. The reasons for the current home sales slump are multifaceted, but housing supply, insurance, demographics, and macroeconomic conditions all play a role. In this article, Experian focuses on the role mortgage rates have on home sales, as measured by home loan originations. The Historical Trend: Can Rising Mortgage Rates Explain Home Sale Slumps? There is a relationship between mortgage financing rates and home prices in the U.S., where most homebuyers finance their purchase with a 30-year fixed-rate mortgage. But it may not be the relationship you'd expect. According to a study by the Urban Institute, home price appreciation has historically increased slightly when mortgage rates are higher. This tilt occurs because higher interest rates are typically associated with robust economic growth, and rate cuts are often the result of central banks seeking to stimulate a slowing economy. As we were reminded last fall, however, Federal Reserve interest rate cuts don't necessarily lead to lower mortgage rates the same way they would for, say, credit cards. In fact, since the first rate cut in September 2024, mortgage rates have barely budged - if anything, they've trended slightly higher in the months following the cuts. You can extend the line back even further. Ever since the 10 interest rate hikes executed by the Federal Reserve from 2022 to 2024, mortgage rates have remained stuck in a narrow, elevated range from near 6% at the lowest to almost 8% at the high end. Indeed, there are recent instances where declining mortgage rates boosted home sales: It occurred that way for most of the 21st century. As rates declined from 8% in 2000 to below 3% during the height of the pandemic, home sales generally increased. Notably, however, home sales were interrupted for a few years by a little thing known as the Great Recession. Challenges Likely to Persist for Homebuyers When mortgage rates climbed from those ultra-low mortgage rate levels several years ago, it wasn't surprising to see home sales volume decline. Quick math reveals the increase in mortgage rates from 3% to 6% increases a homebuyer's average monthly mortgage payment by 34%, from $1,657 to $2,227. Even if buyers were willing to tighten their belts to unhealthy levels in order to make payments, underwriters of mortgages wouldn't be willing to make loans where most of a homeowner's after-tax income services their debt payments. Elevated mortgage rates mean persistently higher mortgage costs for prospective homebuyers, some of whom are being priced out of the market entirely under these conditions. Looking forward to the rest of 2025 and beyond, mortgage rates will likely stay relatively unchanged unless the Federal Reserve gets more aggressive with its rate cuts than the one percentage point already made. With whiffs of inflation still in the air, however, the Fed has signaled that it's unlikely since reducing rates could reignite price hikes. Meanwhile, a recent downgrade of the U.S. Treasury's credit rating by Moody's will mean more near-term upward pressure on mortgage rates, not downward. On top of everything we've covered here, there are also the secondary factors buffeting the homebuying market, including: The cost of rent: Lower rents mean less incentive to move from renting to buyers: All-cash buyers tend to outbid those financing, since they'll be assuming no debt; sellers tend to prefer them paralysis: No one wants to make a big decision, families and executives alike, amid all the costs: Sharply rising insurance costs are also factors making homebuying less likely than in some markets this summer. Unless these factors let up, it's unlikely the conditions buyers (and renters) face will change in the near future. However, despite the pessimistic news facing homebuyers broadly, it's important to understand that home prices are driven more by local economic conditions, not national trends. If the local economy is healthy, then it will attract more workers and create a virtuous and stable cycle of economic growth. In the coming months, everyone will see how large the economic "if" is in impacting local mortgage markets. Methodology: The analysis results provided are based on an Experian-created statistically relevant aggregate sampling of our consumer credit database that may include use of the FICO® Score 8 version. Different sampling parameters may generate different findings compared with other similar analysis. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data. FICO® is a registered trademark of Fair Isaac Corporation in the U.S. and other countries. This story was produced by Experian and reviewed and distributed by Stacker. © Stacker Media, LLC.
Associated Press
21 hours ago
- Business
- Associated Press
Housing red flag: Data show increase in cancellations of home purchase agreements versus a year ago
LOS ANGELES (AP) — The latest sign of trouble in the U.S. housing market: A pickup in home purchase agreements falling through before they're finalized. Some 6% of pending contracts to buy a home were canceled in May, down from 7% in April, but up from 5% in May last year, according to data from National Association of Realtors. May is the third consecutive month with an annual increase in pending home sales cancelations. A separate analysis of housing data by Redfin found that 14.6% of all pending sales in May fell out of contract, up from 14% in May last year, and the highest cancelation percentage for the month of May going back to at least 2017. The trend underscores how even home shoppers who manage to ink a deal with a seller can end up having to back out because of unexpected costs, changes in their credit, employment or financial status, or a low appraisal, among other reasons. 'Stock market fluctuations, restrained consumer confidence and broader economic and geopolitical uncertainties may be leading to higher-than-normal cancellations rates in recent months,' said Lawrence Yun, NAR's chief economist. The U.S. housing market remains in a sales slump going back to 2022, as elevated mortgage rates and rising home prices nationally keep pushing the cost of homeownership well beyond what many would-be homebuyers can afford. While sales of previously occupied U.S. homes in May remained at the slowest pace since 2009, pending U.S. home sales rose 1.8% from the previous month and increased 1.1% from May last year, NAR said Thursday. A home sale is listed as pending when the purchase contract has been signed but the transaction has not closed. There's usually a month or two lag between a contract signing and when the sale is finalized, which makes pending home sales a bellwether for future completed home sales. A snapshot by Redfin of pending U.S. home sales for the four weeks that ended June 22, shows they fell 2.3% from a year earlier, the biggest drop in three months. Economists at mortgage buyer Fannie Mae revised their outlook for existing U.S. home sales this week, citing expectations that the average rate on a 30-year mortgage will end this year at 6.5%. Fannie Mae now expects existing U.S. home sales will rise 2% this year to 4.14 million. The economists' previously forecast the sale of 4.24 million homes. Still, they project home sales will jump 9.5% in 2026 on the back of mortgage rates easing to 6.1%.
The Independent
21 hours ago
- Business
- The Independent
Housing red flag: Data show increase in cancellations of home purchase agreements versus a year ago
The latest sign of trouble in the U.S. housing market: A pickup in home purchase agreements falling through before they're finalized. Some 6% of pending contracts to buy a home were canceled in May, down from 7% in April, but up from 5% in May last year, according to data from National Association of Realtors. May is the third consecutive month with an annual increase in pending home sales cancelations. A separate analysis of housing data by Redfin found that 14.6% of all pending sales in May fell out of contract, up from 14% in May last year, and the highest cancelation percentage for the month of May going back to at least 2017. The trend underscores how even home shoppers who manage to ink a deal with a seller can end up having to back out because of unexpected costs, changes in their credit, employment or financial status, or a low appraisal, among other reasons. 'Stock market fluctuations, restrained consumer confidence and broader economic and geopolitical uncertainties may be leading to higher-than-normal cancellations rates in recent months,' said Lawrence Yun, NAR's chief economist. The U.S. housing market remains in a sales slump going back to 2022, as elevated mortgage rates and rising home prices nationally keep pushing the cost of homeownership well beyond what many would-be homebuyers can afford. While sales of previously occupied U.S. homes in May remained at the slowest pace since 2009, pending U.S. home sales rose 1.8% from the previous month and increased 1.1% from May last year, NAR said Thursday. A home sale is listed as pending when the purchase contract has been signed but the transaction has not closed. There's usually a month or two lag between a contract signing and when the sale is finalized, which makes pending home sales a bellwether for future completed home sales. A snapshot by Redfin of pending U.S. home sales for the four weeks that ended June 22, shows they fell 2.3% from a year earlier, the biggest drop in three months. Economists at mortgage buyer Fannie Mae revised their outlook for existing U.S. home sales this week, citing expectations that the average rate on a 30-year mortgage will end this year at 6.5%. Fannie Mae now expects existing U.S. home sales will rise 2% this year to 4.14 million. The economists' previously forecast the sale of 4.24 million homes. Still, they project home sales will jump 9.5% in 2026 on the back of mortgage rates easing to 6.1%.
Yahoo
a day ago
- Business
- Yahoo
What's next for South Florida housing? Experts share expectations at ‘Rock the Market' event
It was a day for Palm Beach County's real estate moguls. They gathered to share their expectations for one of the richest housing markets in the state at the 'Rock the Market Palm Beach' event, which was presented after a yearslong hiatus. The event came back at a time when Palm Beach County's wealth is flourishing: West Palm Beach has seen some of the largest luxury-home-related growth in the U.S. over the past decade, with the price of a median luxury residence rising to $4.1 million, jumping more than 200% since 2015, a recent Redfin study found. Development is booming, too. Many celebrities and athletes live in the region. And people are flocking to what's billed as 'Wall Street South,' not only from the northeast, but from Miami-Dade and Broward counties. According to some of Rock the Market's keynote speakers, the market still is cooling down a bit, at least in comparison to the unprecedented explosion during and right after the COVID-19 pandemic. People mingled in brightly colored blazers while drinking coffee from disposable cups and ice water from glasses in a conference room at the Embassy Suites by Hilton in Palm Beach Gardens along PGA Boulevard on Wednesday. Speakers either gave quick-hit presentations or participated in question-and-answer panels, and nearly a dozen people had addressed the room before lunch was served. Many engaged with the attendees the way a motivational speaker would by attempting to drum up passion; not necessarily for one's inner psyche but for the world of real estate. Wedged among tips on achieving ultra-luxury sales, networking with billionaires and cashing in big on crypto, Brad O'Connor, the chief economist for Florida Realtors, provided a market update for the county. This included the reality that mortgage and property insurance rates still are high, domestic migration and job growth have slowed, and condo issues pervade. Because of this, 'closed sales in Palm Beach county have significantly declined,' O'Connor said. 'Psychologically, I am sure that is painful.' This tracks with what the Broward, Palm Beaches & St. Lucie Realtors' May market report found, which was an about 7% decrease in closed sales of single-family homes and a 17% decrease in townhome and condo sales from May 2024 to May 2025 in Palm Beach County. But though the county's market may be slowing down, O'Connor reiterated that a significant number of homes are selling, just not at the rate they were a few years ago. And the dollar amount of closed sales for this year so far in the county is at nearly $10 billion, which is 3.6% higher than this time last year, O'Connor said. That could perhaps be attributed to the fact that the number of South Florida homes selling for at least $1 million has been going up since 2019, especially in Palm Beach County, Gay Cororaton, a research economist at the National Association of Realtors, said in her presentation. Cororaton went on to present a real estate outlook, which mirrored the update given by O'Connor. She said she expects: — Mortgage rates to lower in 2026 to between 6% and 6.5%. — An rise in single-family home sales. — A 'modest price appreciation,' particularly in the million-dollar homes pocket. — Consistent demand for office and multifamily space. — Less demand for industrial and retail space because of the federal tariffs. When it comes specifically to the condo market, the challenges there may weaken with the passage of House Bill 913, which Gov. Ron DeSantis signed Monday. The law will 'increase transparency and accountability' on condo associations and provide 'needed financial relief for condo owners' through reserve study extensions, reserve fund contribution pauses, providing alternative funding options and requiring associations to make it easier for residents to access records, such as financial records. Erin Michelle Miller, a Florida attorney focused on transactional real estate law, advised the crowd to become 'condo connoisseurs' by remaining updated on requirements and laws such as HB 913. 'You want your deal to stick together,' she said. Michael Meyers, the Palm Atlantic Division president for Lennar, a developer with projects across South Florida, believes the negative influences in the market — elevated insurance rates, for example — will pass. 'We're still in Florida, we're still in one of the greatest places to live and work,' he said. Meyers offered this insight while sharing the floor with Joey Hartman, the vice president of sales at developer PulteGroup. Hartman promised an aggressiveness with purchasing land and chasing affordability for buyers, which could be a welcome refrain for much of the South Florida market not in the upper echelon of people seeking new million-dollar homes. Redevelopment also was discussed as an opportunity for buyers, sellers and developers. 'There's an opportunity to purchase those buildings that are not good anymore and look for value in them, see opportunities where there might be assessments as we continue to improve this incredible state of Florida,' said Jay Parker, the president of Douglas Elliman Development Marketing, a luxury real estate firm. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
New York Post
2 days ago
- Business
- New York Post
‘Nepo-buyers' are America's new class of homeowners, thanks to parents
An American housing market 'crisis' has some first-time homebuyers turning to the bank of mom and dad to help them achieve the rite of passage. Enter 'nepo-buyers,' who can be described as adult children utilizing either gifted down payments, mortgage co-signs or entire homes and condos from their families. 'Rising home prices, higher interest rates, higher cost of insurance, higher maintenance, just everything being astronomically higher, it's definitely becoming a lot more challenging to become a first-time homebuyer if we don't have some extra help,' Douglas Elliman's Ruthie Assouline told Fox News Digital. 'But almost every buyer that we've worked with that was in that first-[time] homebuyer type of position had some form of parental involvement.' 4 'Nepo-buyers,' those utilizing gifted down payments, mortgage co-signs or entire homes and condos from their families, are entering the housing market. miami2you – Assouline and her real estate team have started noticing a wave of parents or family stepping in to help their children buy properties and have some kind of fighting chance to enter a competitive market. Typically, homebuyers use the 30% rule – or limiting mortgage expenses to no more than 30% of monthly income – to guide their property purchasing decisions. However, a new report from found that affordability in just three of America's 50 top metro areas is such that households that make the median income can scoop up a home that won't go above 30% of their yearly earnings. Additionally, the National Association of Realtors reported that the median age of a first-time homebuyer has now reached 38; and a 2023 Redfin report indicated that 38% of homebuyers under age 30 used either cash gifts or an inheritance for their down payment. 4 According to a 2023 Redfin report, 38% of homebuyers under age 30 used either cash gifts or an inheritance for their down payment. Mdv Edwards – Parent-driven purchases now play a notable role in keeping America's housing market active, especially at entry-level price points that have seen major slowdowns. 'We do work with a lot of empty nesters who have already been well-established in their career and their financial status,' Assouline noted. 'And more often than not, part of the conversation becomes helping their adult children be able to attain their first-time home and talking about realistic expectations of what they can expect in the home that they can not only acquire, but also be able to financially maintain.' 'It could range… from like a down payment to the entire home to maintenance [fees],' she explained. 'It all really varies and there's not a 'one case scenario'… you see that those that do have parental health naturally would have the added advantage, because in the event you were, let's say, in a bidding war, the stronger you can make your terms, the more likely you are to get that property.' 4 'Part of the conversation becomes helping their adult children be able to attain their first-time home,' Douglas Elliman's Ruthie Assouline said about working with empty nesters with established financial status. sutthichai – Focusing primarily on the New York City and Miami real estate markets, Assouline argued she's seen more pros than cons of having the help of mom and dad's money muscles. 'People in general have all become a lot more savvy and a lot more careful with how they spend their money and how they're approaching these acquisitions and these purchases,' she said, 'which, for the majority of people, this is the largest purchase and asset that you have.' 'With parental involvement… they've really been empowering their children to make the right decisions, make sure that they're really doing their due diligence, that they are working with a broker that can help them understand what the market is, what are the comps, what are values, what is it going to be to acquire it, what is going to be maintain it,' Assouline listed. 4 'With parental involvement… they've really been empowering their children to make the right decisions, make sure that they're really doing their due diligence,' Assouline said. Jadon B/ – 'It really helps give you a boost in building your own personal equity, securing your own home. Right now in this crazy world, your home is your safe space and is your protective space. So being able to actually acquire and also maintain that home, that's a huge pro.' 'This is your chance to build your future so that in 20 years from now, when we're in a housing crisis like this again, you'll be able to be that parent to your nepo-[buyer] in the future.'- Ruthie Assouline Some of the nepo-buyer cons include co-ops potentially banning parental support, and being at risk of familial conflict. 'In these co-ops, it varies building by building if you are allowed to accept a parent gift towards the purchase. Some of the buildings do not allow any parental support or help in being able to buy, and some do allow parental support,' the real estate expert said. 'And naturally, if you're buying something with the help of somebody else, that may or may not, and most likely may, include a string that's attached,' Assouline cautioned. 'Whatever that may be, that's all very personal and circumstantial.' Whether you classify yourself as a 'nepo-buyer' or not, Assouline remains bullish about increasing housing inventory nationwide, creating opportunities for first-time buyers not seen in five years. 'Buyers are having more buyer flexibility,' she said. 'Sellers are a lot more amenable to entering into an earnest negotiation… for those that don't have parental involvement, because many, many do not, this is your time and opportunity to enter the housing market… this is your chance to build your future so that in 20 years from now, when we're in a housing crisis like this again, you'll be able to be that parent to your nepo-[buyer] in the future.'
