Normal turns cruel: rates hit 7.09%
The news hit the stands that the average mortgage rate on a 30-year fixed loan came in at 7.09%, which is the highest in over two decades. In contrast, in 2022 the average rate for that same mortgage was approximately 5%. When the interest rates started out in 2020 in the neighborhood of about 3%, the supply of homes quickly dried up due to the cost of a low-priced loan. In 2023, inventories of available existing homes in New Jersey were 13,000. Compare that with existing home inventories in June 2019 of 42,500.
The problem with the high interest rates is that builders, though aware of the opportunity to address the higher demand, are always concerned of being caught in the middle, as they were in 2006 when everything fell apart. Right now, according to the National Association of Realtors, there are approximately 1.1 million homes on the market. With the median existing home price of $410,000 in June, the National Association of Realtors sees that the scarcity of available inventory will reduce the number of total transactions. Compare the number of transactions for single-family homes in June 2020 at 12,000 with those of the same single-family existing homes in June 2023 to be 7,167.
Less choice, more money.
Psychologically, many buyers are hoping for the kind of availability and low interest rates that were available in the early part of 2020, when inventories were up and mortgage rates were down. But the experts are not expecting those conditions to be revisited anytime in the near future or the far future.
One example of demand falling because of the high interest rates could be seen in Austin, Texas, where the median price for a home fell in the second quarter of 2023 by 19%.
Buyers are very cautious about jumping in to buy a home when rates are at 7% since that could result in paying $160,000 more in total interest over the life of the loan.
Nationwide, sales of the existing homes were down 19% this past June from 2022. In New Jersey existing home sales fell in June 2023 to 6,200 homes versus 7,900 homes in 2022.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single-family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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