Property asking prices are falling in CT, but rising interest rates are hurting buyers

To understand how interest rates are hurting Connecticut homebuyers, you need to compare two homes purchased this year. The other, seven miles away, is a two-bedroom ranch in Hamden, both built during the post-war suburban boom.

On a 30-year fixed-rate mortgage with an average annual interest rate in January at the time of purchase, the larger Woodbridge Colonial costs about $160,000 less than the Hamden Ranch purchased this month. Interest rates in August.

Put another way, with an additional $160,000 in purchasing power at January interest rates, a Hamden Ranch buyer might have considered a nearby home that sold for $460,000 this month.

This is a particularly daunting prospect for first-time homebuyers who don’t have a stake in an existing home they can sell to recoup the cost of a new home.

While the Connecticut and national residential real estate markets typically weaken when a new school year begins, sellers are still grappling with the variable of ever-increasing interest rates when calculating how to price properties. As of July, buyers were still averaging 3.5% above list prices, according to Berkshire Hathaway Home Service New England Properties.

However, some sellers have cut prices, defying expectations that interest rates will rise again in September. Sometimes it’s a house that’s been on the market for months, and sometimes it’s been less than a month since the open house.

As of Monday, there are over 16,400 properties for sale in Connecticut. About one in eight Connecticut sellers has lowered their asking price in the past few weeks, according to a report by, from $5,000 for a modest Bridgeport condo to former filmmaker Barry It can range from a $3 million markdown on a property in Reading owned by Levinson.

The Federal Reserve’s Open Market Committee will hold its next meeting on September 21 and the day after. Economists expect the Fed to raise interest rates by at least 0.5% after he raised rates to 1.5% twice in a row in the past three months.

This raises the cost of buying a home for those in need of a mortgage, as well as interest rates on cars, credit cards and other major household debt. As of Friday, mortgage giant Freddie Mac reported an annual rate of 5.55% for its 30-year fixed-rate mortgage, up from 3.22% in January.

As of June, soaring interest rates and pandemic prices had pushed homeownership costs to their highest level since at least 1989, according to the National Association of Realtors monthly index.

But today’s buyers have the potential to escape in the future — the refinancing market, as other lenders offer to underwrite these mortgages at lower interest rates. US mortgage refinancing originations jumped to his highest level since 2003, according to Freddie Mac, when interest rates were at record lows in his first three months of 2021 .

Overall, homeowners refinanced $2.5 trillion in mortgages that year. At the time, interest rates were about what they are today, but down from his 7% threshold crossed in 2001.

An open question is how high mortgage rates will go for the rest of the year.

“Higher interest rates, slower growth and a weaker labor market will keep inflation down, but will also cause some pain for households and businesses,” Fed Chairman Jerome Powell told an economic symposium in Wyoming last week. Stated. “These are the unfortunate costs of keeping inflation under control. But failure to restore price stability would mean far greater pain.”

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