HomeBusiness NewsSlow housing market may not heat up anytime soon, analysts say: ‘The party is over’Slow housing market may not heat up anytime soon, analysts say: ‘The party is over’Wed, August 23, 2023 by ABC NewsSHARE NOW moodboard/Getty Images(NEW YORK) — Sky-high mortgage rates have helped slam the brakes on the housing market, recent data shows.Mortgage rates climbed to their highest levels in 21 years, Freddie Mac data showed last week. The 30-year fixed-rate mortgage averaged 7.09% over the week ending on Thursday, after sustaining levels above 6.5% since May.The home resale market, meanwhile, slowed in July to its lowest rate since 2010,National Association of Realtors data showed on Tuesday.A shortage of supply has kept housing prices elevated, stunting home purchases as prospective buyers stand crunched between twin pressures of expensive borrowing costs and stubbornly high listing prices, analysts said.The dynamic is unlikely to change markedly in the coming months, since both home prices and mortgage rates are expected to remain at or near current levels, they added.Contrasting the current market with the low-mortgage rate environment that took hold during the COVID-19 pandemic, Bess Freedman, the CEO of real estate firm Brown Harris Stevens, told ABC News: “It’s not champagne and caviar anymore. The party is over.”“Buyers are on the fence and struggling with a lack of inventory and higher mortgage rates,” Freedman added. “The next few months will most likely be similar.”The Federal Reserve has put forward an aggressive string of interest rate hikes as it tries to slash inflation by slowing the economy and choking off demand.That means borrowers face higher costs for everything from car loans to credit card debt to mortgages.When the Fed imposed its first rate hike of the current series in March 2022, the average 30-year fixed mortgage stood at just 4.45%, Mortgage News Daily data shows.Each percentage point increase in a mortgage rate can add thousands or tens of thousands in additional cost each year, depending on the price of the house, according to Rocket Mortgage.“It’s all about the Fed,” Lawrence Yun, chief economist at the National Association of Realtors, told ABC News.Many homeowners have resisted selling because they don’t want to give up their relatively low mortgage rates, Yun said, while some buyers are scared off by the added borrowing costs.If interest rates climb further, it will worsen the “logjam,” he added. If borrowing costs turn lower, it could flood the market with buyers and sellers.“Cutting interest rates would immediately bring down mortgage rates,” Yun said.In theory, high mortgages should bring down housing prices, since the added borrowing costs raise the overall cost of homes and scare off buyers, Gregg Coburn, a real estate professor at the University of Washington, told ABC News.However, a shortage of supply in some regions has left prices resistant to the downward pressure, Coburn added.“Scarce supply keeps prices higher than they otherwise would be in the face of higher interest rates,” Coburn said.In addition to the economic forces slowing activity, the housing market tends to cool down during the fall months, Orphe Divounguy, senior economist at Zillow, told ABC News.“That’s just housing market seasonality — it’s normal,” Divounguy said. “I expect the next couple of months to slow down a little bit, especially with mortgage rates where they are.”Still, Divounguy sounded a note of optimism, pointing out that a strong influx of new homes is expected to come online over the coming months, helping to ease the imbalance between supply and demand. That could help ease the burden on homebuyers, he added.“Buyers are going to get a little bit more breathing room,” he said.Prospective homebuyers should weigh their budget and urgency against the market conditions, analysts said, noting that the right home can be still be found during a slow period.“Even in a crisis, there are opportunities,” said Freedman.Yun cautioned that a better deal may not materialize in a hotter, low-mortgage rate market down the road.“Maybe there will be more choices,” Yun said. “But lower interest rates mean more buyers. I would say to consumers, don’t overstretch your budget but look at any new listing that comes out. Maybe you’ll be lucky and there won’t be any buyers.”Copyright © 2023, ABC Audio. All rights reserved.