Where did mortgage rates start the week?

Starter homes disappearing | mortgage rate news

Where did mortgage rates start the week?

Volatility in the overseas markets lead to an equally rough start to the week. The mortgage rate for a 30-year fixed rate mortgage ended the Monday session at 6.87%, up 0.17% from where they ended last week. What this means is, a monthly payment on a new $400k mortgage is up over $1,000 a month when comparing current rates to what home buyers could get a year ago.

Home buying cancellations up

A recent study of home sales in August 64,000 home-purchase agreements were canceled. That’s about 15.2% of home contracts initiated during the month. The percentage of canceled purchase agreements in August was similar to the 15.5% mark in July. In August of 2021, the number of cancellations was only 12.1%.

Potential homebuyers dropping out of a sale isn’t the end of the world, but it is surprising to see shoppers changing their mind at a higher-than-average rate for the last two months. Depending on the agreements they have in place, it’s possible that buyers are sacrificing earnest money in an effort to get out of a purchase.

Are starter homes dying off?

The New York Times recently published an article detailing how the housing market has shifted in the past 80 years. In 1940, 70% of homes were ‘starter’ homes. In 2022? 1,400 square foot ‘starter’ homes only make up about 8% of the housing market.

The reason for the change isn’t quite what you might think. The cost have land has lead builders to build houses that they can make a profit on. Meaning, larger homes that are a bit more complex in construction than a duplex or a rowhouse. Given the current housing market, builders may look to rethink their strategies and develop housing that could substitute for what was formerly called a starter home.

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