TAMPA, Fla. (WFLA) — A report on the housing market found that about 60,000 agreements to buy homes were canceled as mortgage rates rose to their highest levels in years. Real estate company Redfin said contracts were canceled as the higher rates put home affordability out of reach.
Just under 15% of all homes that went under contract in June fell out, according to Redfin’s data. They said it was “the highest percentage on record with the exception of March and April 2020, when the housing market all but ground to a halt due to the onset of the coronavirus pandemic.”
Since the Federal Reserve began increasing interest rates to combat rising and ongoing inflation, Redfin said the housing market has cooled in response.
“When mortgage rates shot up to almost 6% in June, we saw a number of buyers back out of deals,” Lindsay Garcia, a Redfin real estate agent in Miami, said. “Some had to bow out because they could no longer get a loan due to the jump in rates. Buyers are also more skittish than usual due to economic uncertainty.”
The company did note that not every contract that fell in June was put under contract the same month. Some may have gone under contract in May, according to Redfin.
Even with the Federal Reserve’s interest rate increases, the rate for a 30-year fixed rate mortgage has fallen, as of the most recent measure.
Freddie Mac, a federally backed mortgage company, publishes weekly mortgage rates every Thursday. In its latest measure, the mortgage rate for a 30-year loan went down from 5.7% to 5.3%.
The company said “the 30-year fixed-rate mortgage dropped by half a percent, as concerns about a potential recession continue to rise.”
However, compared to a year ago, the rate is still much higher. In June 2021, the rate was 2.9%.
“While the drop provides minor relief to buyers, the housing market will continue to normalize if home price growth materially slows due to the combination of low housing affordability and an expected economic slowdown,” Sam Khater, Freddie Mac’s Chief Economist, said.
While home sales are falling through, rental costs are also starting to ease on growth, according to Redfin. Their report on prices across the market show costs increased 14% in June, which they said was the smallest increase since October 2021.
Redfin said rent increases “tapered off” in June as asking rent prices went up just 0.7% compared to the month before. In addition to the lowest increase in a year, it was the smallest monthly increase of 2022.
“Rent growth is likely slowing because landlords are seeing demand start to ease as renters get pinched by inflation. With the cost of gas, food and other products soaring, renters have less money to spend on housing,” Redfin chief economist Daryl Fairweather said. ”This slowdown in rent increases is likely to continue, however rents are still climbing at unprecedented rates in strong job markets.”
Fairweather listed areas like New York, Seattle, San Antonio, and Austin as locations where strong markets and high popularity drove rental costs upward. The company said Florida metro areas are beginning “to moderate” as cities in the Sunshine State fell out of the list of top 10 metros with fastest-rising rents.