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Housing Market Stuck Amidst Rising Mortgage Rates: What's Ahead for Homebuyers?

October 6, 2023 | By Reef Merhi

Table Of Contents

The housing market in Texas is going through some tough times, and it's mainly because of the rising mortgage rates. If you're thinking about buying a home, you'll want to pay attention to what's happening.

High Mortgage Rates are a Challenge

Mortgage rates are like the interest you pay on your home loan. When these rates go up, it can become more expensive to buy a house. Many people who want to buy a home are sensitive to these rate changes. When rates go up a lot, some people decide not to buy a house.

Purchase Applications are Down

Recently, mortgage rates reached their highest point in 23 years. Because of this, the number of people applying to buy homes has dropped. In fact, it's the lowest it's been since 1995.

Hope is on the Horizon

There's some good news, though. Some experts believe that before the end of the year, the 30-year fixed-rate mortgage (which is a popular type of home loan) might become more affordable again. That would be great for people wanting to buy homes in 2024.

Homeowners are Hesitant to Sell

People who already own homes are also feeling the pinch of high mortgage rates. Most of them have really low mortgage rates (less than 6%). Because of this, they don't want to sell their homes and get new, more expensive mortgages. This is making it hard for new buyers to find homes to buy.

Home Affordability is a Concern

It's not just high mortgage rates causing problems. Home prices are going up, too. This is because lots of buyers are competing for the same houses, and that drives prices higher.

Even though there are fewer people applying to buy homes, the prices keep rising. This makes it tough for people to afford the homes they want.

The Federal Reserve's Role

The Federal Reserve is like the boss of interest rates. They don't set the rates directly, but they can influence them. This means what the Fed does can affect how much you pay for a mortgage.

Mortgage rates usually follow the yields (returns) on something called "10-year US Treasuries." These yields change based on what the Fed does and how investors react. When yields go up, so do mortgage rates. When yields drop, mortgage rates often follow.

Watch Out for the Jobs Report

What happens in the job market can also impact mortgage rates. A strong job market can lead to higher rates. There's a big jobs report coming out soon from the Bureau of Labor Statistics. The head of the Federal Reserve, Jerome Powell, says this report is super important. The Fed wants a strong job market.

The Fed has its own ideas about how the economy should perform. For example, they're hoping to see a low unemployment rate of 3.8% in 2023 (down from 4.1% earlier in the year).

What to Expect Next

Experts say that if the jobs report shows the job market is struggling, mortgage rates might go down a bit. This could be good for homebuyers. But if the jobs report is strong and shows lots of people are getting jobs, mortgage rates might go up even more. That's something to be aware of if you're planning to buy a house soon.

In Conclusion

The Texas housing market is facing challenges because of high mortgage rates and rising home prices. If you're thinking about buying a home, keep an eye on mortgage rates and the job market. There's hope that rates might become more affordable in the future, but it's important to stay informed about what's happening in the market before making any big decisions.

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