Home prices aren't falling as buyers accept the new normal of 7% mortgage rates, Compass CEO says
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- Homebuyers see 7% mortgage rates as the "new normal," Compass CEO Robert Reffkin said.
- Reffkin pointed to signs of resilient demand such as increased purchase activity.
- Prices are unlikely to ease until mortgage rates pull back to the 5% range, he previously predicted.
Home prices aren't falling as buyers are now accepting 7% mortgage rates, according to Compass CEO Robert Reffkin.
In a recent interview with CNBC, Reffkin said 7% is now the new normal after previously saying 6% was the new normal, pointing to signs of sustained demand.
Mortgage purchase activity increased in three out of the last four weeks, per Mortgage Bankers Association data. The number of people purchasing homes without a mortgage has also risen, with all-cash buyers making up 40% off the market, up from the historical average of 25%, Reffkin said, adding that home prices have risen month over month every month this year.
"I think now we're in an environment where 7% mortgage rates are now the new normal, and people are accepting it," Reffkin said.
The average 30-year-fixed mortgage rate clocked in at 6.75% this week, per Zillow data, after previously hitting 7% earlier. Meanwhile, Mortgage Daily News' survey last week showed the rate jumped to an eight-month high of 7.22%.
Though high mortgage rates typically lower housing demand and cause a pullback in home prices, some buyers are forced to purchase a new home for reasons like marriage, a new job, or moving to a new city, Reffkin said. Many of those buyers have chosen to hold onto their existing properties and rent them out to tenants.
Experts say home affordability won't improve until mortgage rates pull back more significantly, which could encourage more existing homeowners to list their properties for sale.
But that's unlikely to happen anytime soon: mortgage rates are expected to ease to just 6% by the end of the year, according to some estimates, though Reffkin expects rates will need to drop to around 5% in order to see a "flood" of inventory that will lower home prices.