'Scary' mortgage rates, sticker shock forcing homebuyers to walk away from contracts, broker says
30-year fixed mortgage hits 6.52%, double from one year ago
Pamela Liebman: ‘Scary’ mortgage rates forcing homebuyers to ‘walk away’ from contracts
The Corcoran Group president and CEO Pamela Liebman argues homebuyers wouldn’t ‘typically’ have the ability to back out of a contract when the market’s ‘on fire.’
With the 30-year fixed mortgage rate doubling from one year ago and the housing market facing "less affordability," one real estate broker is warning that potential buyers are more likely to back out of pending deals without consequence.
"These are scary numbers a little bit. You would never have expected this before because typically you wouldn't have the ability to back out of a contract," The Corcoran Group president and CEO Pamela Liebman told "Mornings with Maria" Wednesday. "Nobody would give you a mortgage contingency when the market was on fire and just going up, up, up."
"But now that sellers are a little more desperate to get these deals done, they are offering these contract contingencies," the broker continued.
As mortgage rates continue to hit multi-year highs each week and market demand starts to cool, a report from Redfin found states within the Sun Belt have seen the highest rates of contract cancellations. According to Liebman, a lot of homebuyers back out after feeling the mortgage sticker shock.
MORTGAGE RATES DOUBLE VS. YEAR AGO, REFINANCINGS HIT 22-YEAR LOW: SURVEY
The Corcoran Group president and CEO Pamela Liebman said "scary" mortgage rates have created "less affordability" in the real estate market on "Mornings with Maria" Wednesday, Sept. 28, 2022. (AP Newsroom)
Mortgage rates increased more than a percentage point over the past six weeks. At the end of the Sept. 23 week, the 30-year fixed rate was 6.52%, which is the highest it has been since mid-2008.
"You may have applied for a mortgage two weeks ago, and now the cost is significantly more, and it just makes it unaffordable and people will walk away," Liebman explained.
Expensive mortgages and home prices have taken "a lot of people" out of the home-buying market, the broker further detailed.
"I think also that a lot of the fun places to buy, whether it’s in Vegas or Orlando or Montana, some of that is not so fun anymore because it's gotten a lot more expensive," Liebman said. "And disposable income is not what it was because of the inflation all over the place."
Now that home sellers have more listings to compete with, the real estate expert noted, people will try to gain buyers’ attention and offers by dropping the asking price.
"This is a market nationally that really saw such incredible price increases during the pandemic, that it's a double whammy of expensive prices and expensive mortgages," Liebman said. "So something's got to give."
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Real estate market facing ‘double whammy’ with expensive prices, mortgages: Pamela Liebman
The Corcoran Group president and CEO Pamela Liebman says ‘something’s got to give’ in the current housing market.
Though Liebman expressed she doesn’t believe the U.S. is experiencing a housing recession, she advised those active in the market should "plan for surprises."
"We want more people to be able to buy new homes, and we've got a whole new generation now that's getting ready to enter the market. So I think housing will be fine, and as Chairman Powell said, maybe a little more balanced," The Corcoran Group CEO said. "You just really have to talk to somebody who can financially advise you whether an uptick in the rate is going to crush you financially."
FOX Business’ Elizabeth Pritchett contributed to this report.