6% mortgage rates helping cool housing market for the first time in years

Mortgage rates are now above 6% for the first time since 2008. The home real estate market is finally cooling from the buying frenzy during the COVID-19 pandemic.

One effect is that fewer homebuyers are waiving inspections to win the bid.

"You’d be surprised. Some houses are an Instagram gift," said James Brock with Boston Home Inspectors.

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Brock has been posting pictures on Instagram of surprises his team has found over the years.

Surprises like a door that opens over stairs, a TV antenna mounted on a ladder on the deck railing, an elevator that opens to a toilet, and a toilet inside a shower.

"It was a brand-new renovation. They had the toilet in the shower, inside the glass door. You see the shower and the toilet are right there," said Brock.

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He says unexpected problems with decks, foundations, roofs, and mold can cost tens of thousands of dollars to fix.

"When a family member gets their uncle to do the plumbing, or build a deck, things that aren’t to code," Brock explained.

They're all reasons not to waive inspections, he says, as many homebuyers have in this hot real estate market.  

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But realtors say fewer buyers are waiving them now, as rising mortgage rates are cooling off the market.

"It's the fifth month in a row we've seen a decline in sales. We’re down almost 17% from this time last year," said Jennifer Wauhob, President of the Houston Association of Realtors.

Inventory is finally starting to rise, but not enough.

"We are still in a low inventory market. Nationwide, we are short housing units, and it’s going to take several years to catch up," said Wauhob.

It's all due to high inflation and mortgage rates that rose from below 3% a year ago to more than 6% now, as the Fed has been raising interest rates to curb inflation.

"A 6% interest rate, versus where we were this time last year, on a $300,000 house, that’s almost a $600 difference a month," explained Wauhob.

Keeping many buyers on the sidelines for now. 

"Honestly, at this point, you have to continue working hard and cross your fingers for that promotion," said Juliana, a hopeful buyer in Miami.

The Fed is expected to raise interest rates again next week, which could mean even higher mortgage rates soon.