Home Sales Keep Rising Despite High Mortgage Rates | Global News Avenue

Homebuyers may not like the new normal of mortgage rates as high as 6%, but they’re getting used to it.

The National Association of Realtors (NAR) said Thursday that existing home sales increased for a third consecutive month in November to a seasonally adjusted annual rate of 4.2 million units. The 6.1% increase compared with the same period last year was the highest year-over-year increase in sales since 2021 and exceeded forecasters’ expectations for an annual growth rate of 4.1 million units, according to a survey of economists. Dow Jones Newswires and wall street journal.

Sales remain at historically low levels in November

The sales rate was the highest since March but below historical standards. Soaring home prices and mortgage rates that are much higher than during the pandemic continue to deter buyers.

Annual sales are expected to fall to their lowest level since 1995, Lawrence Yun, the association’s chief economist, said on a conference call with reporters. However, the “lock-in effect” of high mortgage rates may be fading, boosting sales.

“Maybe consumers are just getting used to this mortgage rate as the new normal,” Yun said.

Mortgage rates remain high

The average interest rate on a 30-year mortgage in November ranged from 6.72% to 6.84%, according to Freddie Mac. That’s more than double the historically low 2.65% that buyers were able to obtain in early 2021, when many homeowners took the opportunity to refinance.

Yin speculates that living circumstances may force some homeowners to sell their low-rate mortgages and exchange them for today’s more expensive mortgages.

“Maybe people are retiring, maybe they’ve found a job in another location. All of these life-changing events mean people need to give up the locked-in 3%, 4% mortgage rates in order to find their next home,” he said.

However, higher mortgage rates undoubtedly still put home ownership out of reach for many potential buyers.

Buying a home with a median price of $406,100 at a mortgage rate of 6.84% would require a monthly payment of $2,127, assuming a 20% down payment and a 30-year loan term. A home of the same price would cost just $1,421 per month with an interest rate of 3.29%, which was the average rate in early March 2020 before the pandemic hit.

Buyers on the sidelines may be disappointed with the direction mortgage rates have taken in recent months. The Federal Reserve has cut its benchmark interest rate by a full percentage point since September, but mortgage rates have not followed suit.

Mortgage interest rates are affected by the following factors federal funds ratewhich determines the short-term interest rate at which banks lend to each other. However, mortgage rates also depend on other financial market factors, such as the 10-year Treasury note yield and investor concerns about inflation.

U.S. Treasury yields surged on Wednesday despite Fed officials cutting interest rates lowered their expectations Further interest rate cuts are expected next year.