A sharp jump in mortgage rates from May to June are now beginning to weigh on the Vero Beach housing recovery. The two-month delay can be attributed to several factors—first and foremost that most potential home buyers lock in mortgage rates early, and sale closings can take up to two months to be finalized.
Second, there may also have been a surge in homebuying because of the rise, as those on the fence suddenly jumped in, fearing rates would continue going up and they would be priced out of the market. Those factors have now expired.
The sharp rise in mortgage rates has led to a pause in demand. The initial urgency seen from buyers as rates moved higher has subsided and now buyers appear to be stepping back to re-evaluate their options. There was also a drop in buyer traffic in July, the first time since last December that it didn't exceed expectations.
Vero Beach Housing Just Seeing A Brief Pause?
While buyers may be pausing, however, their optimism is not. Americans are increasingly hopeful about housing's return. Sixty-two percent believe mortgage rates will go up over the next year, according to a new Fannie Mae survey, but 74 percent also say it is now a good time to buy a house, an increase in both from June.
"Expectations for continued improvement in housing persist, and sentiment toward the current buying and selling environment is back on track from its dip last month," according to Doug Duncan, senior vice president and chief economist at Fannie Mae. "These results are consistent with our own analysis of previous housing cycles, which finds that interest rates and home prices are not strongly correlated."
There is also the question of home prices, which continue to rise because of a severe lack of homes for sale. "We see many threats to the housing recovery," said Jaret Seiberg of Guggenheim Partners. "Rising rates will make homes less affordable. We also are concerned that investors have artificially stabilized some markets and driven prices up beyond what consumers can afford at today's higher interest rates."
Vero Beach housing is still more affordable than it's been in many years, when combining the historically low mortgage rates that are still out there with prices that are still 20 to 26 percent lower than they were at their peak.
Talk to us at Buyer's Choice Realty. Let us help you decide if now is a smart time to dive into the market and secure your own home before prices and rates go any higher. We'll be happy to sit down with you and discuss the options available.