I have been asked a lot over the past month if the recent rise in interest rates has impacted home purchases. Here is what I have seen. The number of people looking to buy a home or enter into contract on a home has not slowed with the rise in interest rates. Every day, we receive at least one call from a perspective buyer looking to be preapproved. We spoke with a buyer at 9pm last night wanting to write an offer, and another buyer this morning at 9am looking to be pre-approved. Perspective buyer calls are at an all-time high at Dave Financial.
I think what continues to drive the demand is home affordability, with a little bit of fear thrown in. Homes are still very affordable for most buyers as a percentage of their income. The rise in interest rates did very little to disqualify most of the buyers we work with. Home buyers were shell shocked for about a week once the rates rose. Most have now adjusted, and have continued to look for homes, unphased by the new paradigm. The fear of future higher rates is also pushing many people to act now.
This seems to be in line with the data available from other sources. New home purchases continue to rise. According to the Commerce Department, new home sales surged in June to the highest level since May of 2008. New home sales are up 35 year over year, and 8.3% from May to June. Statistics also show that the overall housing market continues to be plagued by tight supply. At the current sales rate, the supply of new homes for sale equates to only a 3.9-month supply, down from 4.1 months in May. This is the lowest level in nearly a decade and explains a lot of the year-over-year increases in home prices.
While the market is uncertain, all signs seem to point to a continuation of the upward trend in prices. The rise in rates has done very little to cool the market in my opinion. I believe the trend will continue for at least a year, and maybe longer. Right now, there are too many qualified buyers looking for homes to show otherwise.
If you or someone you know is looking to make a home purchase, we are here to help. We can answer any questions you may have. Let us know what we can do for you.