The housing market has seen fluctuations in recent times, with the average 30-year fixed mortgage rate currently at 6.9%. After a slow market last year, there was a resurgence as 2024 began. However, the market has once again cooled off due to a surge in mortgage rates. Experts attribute this to high inflation, which has delayed interest rate cuts at the Federal Reserve. This has led to a decrease in home sales, with mortgage-purchase applications falling by 10%.
The housing market dynamic can be traced back to an announcement in December, where the central bank revealed expectations of interest rate cuts in 2024. This initially boosted optimism among market players, but inflation has remained stubbornly high due to stronger than expected economic performance and resilient consumer demand. Consumer prices rose 3.1% in January compared to a year ago, remaining above the Fed’s target rate of 2%.
The rise in mortgage rates, from 4.45% to 6.9%, has added significant costs for potential homebuyers, leading to a freeze in the housing market. High home prices have also contributed to this, as buyers are hesitant to commit to higher rates. This has resulted in a reluctance among prospective homebuyers to put their homes up for sale, causing home prices to remain stable or even increase.
Overall, the housing market has seen a slowdown due to high mortgage rates and home prices, creating an affordability problem for many consumers.
