Home prices have fallen as sellers struggle to get offers. According to data from real estate brokerage Redfin, the number of signed purchase contracts in L.A. County during the four weeks that ended Feb. 5 was 42% lower than a year ago. Even so, it’s an improvement over December’s 51% drop.
The modest rebound is not certain to last. It may be necessary for returning buyers to adjust what they can afford quickly. Recent economic reports indicate that inflation will be harder to control than expected, which has resulted in a rise in mortgage rates – heavily influenced by inflation.
These recent real estate studies and economic market analytics will surprise you.
According to a recent article in LA Times, during the pandemic housing boom, Los Angeles resident Stephen Jackson lost out on more than a dozen properties. A cash-paying buyer outbid him by $25,000 in 2021, ending his search. The 31-year-old human resources manager said, “I’m never going to get a home here.”
Mortgage rates exploded last year, making sky-high prices even less affordable and stalling home sales.
In October, Jackson decided to look again, this time seeking deals swirling in the crosscurrents of the real estate crisis. He made an offer last month on a downtown L.A. condo that had been on the market for 72 days. His offer, the only one, was accepted at $20,000 below the $450,000 list price.
“All my friends were shocked I bought a home right now, and I was like, ‘Why wouldn’t you?’” Jackson said.
According to Freddie Mac, the government-backed mortgage buyer, the average 30-year fixed mortgage rose to 6.32% from 6.09% two weeks earlier.
According to the industry publication Mortgage News Daily, the average is even higher: 6.8% as of Friday.
One mortgage broker reports that the demand for home buying dropped significantly as rates rose last week, but other brokers and agents said buyers plowed ahead undeterred.
A monthly mortgage payment on an $800,000 house would cost about $100 more with an interest rate of 6.32% than with 6.09% for buyers who put down 20%. Freddie Mac reports that the payment at 6.32% is $322 less than at 7.08%, where rates peaked in the fall.
Home prices are falling, which helps offset some of the negative effects of high-interest rates.
Home prices in Los Angeles County have fallen by 3% to 14% since their peak last year, according to various platforms that track prices. In addition, with less competition, sellers are more likely to pay for repairs or cover closing costs. Some lenders will buy down a buyer’s interest rate.
Freddie Mac reports that the payment at 6.32% is $322 less than at 7.08%, where rates peaked in the fall.
However, higher mortgage rates could derail the modest recovery.
Mortgage applications, a precursor to home sales, declined compared with the previous week as interest rates rose, according to MBA data.
Zillow economist Jeff Tucker believes home prices may have already bottomed out. He said prices could rise again if demand increases modestly because inventory is very low.
According to the Mortgage Bankers Association, potential buyers remain quite sensitive.
There is much to consider for would-be home buyers given the uncertainty. Buying now and prices keep falling might not allow them to sell and could put them at risk of foreclosure if they lose their jobs.
Several escrows fall apart due to buyer skittishness, says Jeff Lazerson, president of Mortgage Grader in Laguna Niguel.
Lazerson said buyers were worried. The question is, ‘Will the price be lower after six months? ’”
