Rising Mortgage Rates: August 24, 2023

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Find out how mortgage rates have increased in August 2023 and how this could affect the housing market in the coming months. Get valuable insights into how rate changes can impact home buying and selling decisions.

Mortgage Rates Increase, Impacting the Real Estate Market

In news that has caught the attention of both buyers and sellers, mortgage rates have risen in the week of August 24, 2023, reaching 7.23% compared to 7.09% the previous week. This change represents the highest monthly interest rate for a mortgage since June 1, 2001, when rates reached 7.24%.

Looking back at the period between June 1991 and May 2001, the average mortgage interest rates were 7.81%. During that time, consumers felt comfortable taking on a mortgage in the 7% range. However, there is a significant difference between what happened 22 years ago and the current landscape: housing prices and inventory were more in line with wages and the population back then.

In June 2001, the market had 2.11 million existing homes available for sale. In the data for July 2023, that number has dropped to only 1.11 million existing homes on the market. This contrast between supply and demand, combined with rising interest rates, has created a challenging scenario for those looking to enter the real estate market.

The highest interest rate in 22 years translates to a monthly payment of $2,246 for a typical existing single-family home and $1,948 for a condo. New home sales are increasing, while the inventory of existing homes is limited. However, the sale price of a new home is approximately $30,000 higher than that of an average existing home, resulting in a monthly mortgage payment of $2,379 for a typical new home. Unless rates decrease, this could limit opportunities for buyers to enter the market and affect sellers' willingness to make moving decisions.

Dr. Jessica Lautz, Deputy Chief Economist and Vice President of Research at the National Association of Realtors (NAR), points out that these changes in mortgage rates could significantly impact market dynamics. With demand for new homes rising and existing home inventory being limited, the evolution of mortgage rates is a key factor to watch in the coming months.

In conclusion, the increase in mortgage rates in August 2023 is generating repercussions in the real estate market. Both buyers and sellers need to be aware of how these changes might influence their decisions. The relationship between interest rates, housing supply, and demand will play a crucial role in determining prices and transactions in the real estate market in the coming months. Keep an eye on news and expert analysis from professionals like Dr. Jessica Lautz to better understand how these trends might affect your housing plans.

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