Mortgage rates rose by more than one percentage point in September. According to Freddie Mac, the 30-year fixed mortgage rate increased to 6.7% from 5.66% in the first week of September. As a result, home buying is 12% more expensive now than a month ago. In other words, current buyers need to spend about $250 more every month to buy a median-priced home compared to buyers who purchased their home a month ago.
Due to fast-rising mortgage rates, the housing market has slowed down. However, as we head into the last quarter of the year, activity may decline even further. Every year, transactions and prices tend to be above-trend in the summer, while activity typically slows down in the fall and winter. The impact of seasonality is vital to the housing market since it affects housing demand and supply. Specifically, the fourth quarter is typically one of the slowest quarters for home sales, representing 24% of the total activity throughout the year. Compared to the third quarter, activity typically drops by 15 percentage points in the last quarter of the year. Nevertheless, this drop will be no surprise, with mortgage rates near 7% and an even larger reduction in home sales.