There were 481,000 available homes on the market in May, data showed, even as many would-be sellers choose to stay in place to keep the record-low mortgage rates they secured at the height of the COVID-19 pandemic when borrowing costs were considerably below their current level.
While mortgage rates have dipped below the 7% mark in recent weeks, they remain elevated by comparison with the rock-bottom rates that prevailed during the pandemic – and with the Federal Reserve giving little indication that it’s prepared to consider an imminent rate cut, they’re expected to remain high for the foreseeable future.
First American’s deputy chief economist Odeta Kushi said buyers appeared to have reached an “inflection point” last month, with incentives from builders no longer enough on their own to counteract high mortgage rates.
Kushi said the new-home market had remained “a relative bright spot” in the housing market because of builders’ ability to offer those incentives, but “they are not immune to the impact of higher rates.”
That slight recent drop in mortgage rates, as well as a dip in the median price of new homes, should support the new-home market, she added – with plenty of demand still at play despite the current challenging landscape.
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