So many things are working against would-be home buyers this summer.
The housing market remains stuck, with sales pushed lower by a lack of both affordability and inventory, recent credit tightening, higher interest rates and home prices firming up across the country after a brief correction last fall.
The stubbornly low inventory of homes available to buy is keeping prices up and pushing sales down during this typically busy season. Many current homeowners who bought or refinanced into a 2%, 3% or 4% mortgage rate during the pandemic are reluctant to sell and become buyers with a mortgage at 6% or higher.
More than 60% of existing mortgage holders — the potential sellers who could bring inventory to market — are sitting on mortgages with rates below 4%, according to Black Knight, a mortgage data company. Even if they are likely to get a good price selling, they do not have an incentive to list in this environment.
In recent weeks, as mortgage rates closed in on 7%, affordability has worsened.
The monthly principal and interest payment needed to buy the median-priced home rose to $2,258 in June, marking the highest payment on record, according to Black Knight.
Nationally, it takes about 36% of the median household income to make the average mortgage payment — more than the recommended 30% allowance for housing.
Adding to all of that is a tightening of credit, with credit availability remaining close to the lowest levels since early 2013, as the industry continues to operate at reduced capacity, according to a report from the Mortgage Bankers Association.
However, there is some hope ahead: Mortgage rates are expected to drop in the second half of this year as inflation continues to cool, with economists and housing analysts forecasting rates to end the year around 6%.
