Buyers are finding they can't afford as big a mortgage as they could just a few months ago, and sellers are being forced to reduce their asking price.
Shocking new data released Wednesday shows inflation in June rose 9.1% from a year ago — that's the highest 12-month increase in 40 years.
The news is adding to fears of a recession. It’s also affecting the housing market, and the sky-high real estate prices are now finally coming back down to earth.
Not too many months ago, some open houses were attracting lines down the street.
“It was insanity. It was offers happening before the open houses even happened,” realtor Elizabeth Kluft-Badway said.
But with skyrocketing inflation and an interest rate approaching 6%, that’s no longer the case. Nationwide, 60,000 deals collapsed before closing last month, because buyers couldn’t afford the new mortgage payments.
Realtor Mike Closky recently held an open house in Sherman Oaks, California, and nobody showed up. That was after knocking a whopping $300,000 off the asking price of $1.3 million.
Rising interest rates are creating a double whammy. Buyers are finding they can't afford as big a mortgage as they could just a few months ago, and sellers are being forced to reduce their asking price.
Home prices are plunging all across the country.
Real estate agent Lindsay Katz listed a Los Angeles home at $849,000 expecting a bidding war. The price has been slashed by $10,000 and may have to go lower.
“The real estate boom that was induced by the pandemic — which was the biggest boom I’ve personally ever seen and I’ve been doing this for 20 years — that’s over right now,” CNBC correspondent Diana Olick said.
