Mortgage rates finally snapped a punishing two-month upward streak this week. But you won't find many buyers or builders celebrating. The cost of borrowing is still high enough to keep the housing market in a deep freeze.
Why the math keeps buyers home
Rates dipped slightly this week. It gave us a tiny sliver of relief, but borrowing costs are still so high that most people simply can't afford to move.
Demand is cratering. Applications for a mortgage to purchase a home were 18% lower than the year before, according to CNBC.
When borrowing money costs this much, even big price cuts aren't enough to make the monthly math work. Buyers are trapped. They can't afford the homes they want, and they refuse to trade their current low-rate mortgages for much higher ones. The reality is simple: interest rates dictate the market far more heavily than inventory right now.
Builders hit the brakes
New construction was the one bright spot for buyers lately. Now developers are losing their nerve. Housing completions decreased 14% compared to last year, Realtor.com reports. Builders are quietly pulling back on breaking new ground to avoid getting stuck with empty houses.
If you're actively trying to buy, this industry panic is actually your best source of leverage. Builders have sitting inventory they desperately need to move before the year ends.
To get deals done, builders are offering reduced rates that let buyers pay as much as a full percentage point less on their mortgage. That discount can save you hundreds of dollars a month. It makes a new build far more attractive than an existing home.
What's happening in your state
The freeze is showing up in local markets that were incredibly hot just a couple of years ago. Sellers have to rethink their strategies.
Nearly 48% of active listings in Tulsa, Oklahoma, have seen a price reduction, according to HousingWire. Sellers are aggressively slashing asking prices just to get foot traffic through the door.
Meanwhile in Nebraska, Omaha has seen a sharp decline in the number of pending contracts compared to new listings hitting the market. Buyers are taking their time.
Down in Alabama, Huntsville is seeing active asking prices drop year over year. Sellers are finally adjusting to a high-rate environment.
The bottom line for you
- If you're tired of waiting out the market, look closely at new construction. Builders are offering massive incentives right now. Our mortgages guide can help you understand how these rate buy-downs actually work.
- Holding out for rates to plummet before you refinance? You might be waiting a while. Demand for refinancing a home loan dropped 59% year over year. If you need to lower your payments soon, check our mortgage refinancing guide to see if buying points makes more sense for your timeline.