August 30, 2022 at 08:12 AM
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Mortgage rates nearing 6%, ‘Fed Speak,’ and recession fears contributing to concerns.
Count a pair of Florida professors among those who are reporting that home prices might have finally peaked in July.
Florida Atlantic University’s Ken H. Johnson, Ph.D., and Florida International University’s Eli Beracha, Ph.D., each month rank the 100 most overvalued housing markets by analyzing their premiums – the percentage above the long-term pricing trend that consumers must pay in order to buy a property.
In July, they found that premiums declined from June in 27 markets, mostly west of the Mississippi River, and 22 of the 27 also experienced price declines.
Following are key metros with falling premiums and average prices: Austin, Texas; Denver; Minneapolis; Los Angeles; Phoenix; Salt Lake City, Utah; San Francisco; and Seattle, they said.
In June, premiums declined in 12 markets and average prices fell in seven.
Mortgage Rates at 5.95% Monday
Calculated Risk blogger Bill McBride reported Monday that 30-year, fixed mortgage rates reached 5.95%, according to Mortgagenewsdaily.com, “probably due to Fed Chair Powell’s speech on Friday.”
Next up the ladder is the 6.28% rate on June 14. A year ago, the 30-year fixed-rate mortgage averaged 2.87 percent.
Freddie Mac’s Chief Economist, Sam Khater, said in a release late last week that the combination of higher mortgage rates and the slowdown in economic growth “is weighing on the housing market.
“Home sales continue to decline, prices are moderating, and consumer confidence is low. But, amid waning demand, there are still potential homebuyers on the sidelines waiting to jump back into the market.”
Johnson asked, “Will prices decline quickly and noticeably or will we see the nation’s inventory issues support prices at the expense of a prolonged period of housing unaffordability?”
He said it will depend on population movements and how fast much-needed housing units are built.
‘High Rates’ Causing Contract Cancellations
Additionally, Americans continue to back out of contracts due to recession fears, according to Cinch Home Services’ August survey of more than 1,000 American buyers and sellers over the past year who are currently in the 2022 real estate market.
“Over half (54%) of American home buyers currently in the housing market report their housing contract has fallen through,” the company wrote in a release, and “roughly 1 in 5 buyers report canceling the contract due to the fear of an upcoming recession.”
Mortgage applications being declined (42%) and interest rates being “too high” (31%) are other big reasons why 2022 housing contacts are currently being canceled, according to Cinch.
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