(Central News Agency reporter Lin Honghan, Los Angeles, 10th) U.S. mortgage interest rates continue to rise to 7.40%, real estate transactions have cooled, and buyers and sellers are on the sidelines. A reporter from Central News Agency visited a residential renovation site in California that is about 50 years old. As mortgage interest rates rise and the cost of house replacement increases, some homeowners are prudent and choose to renovate their original homes instead of buying new ones.
U.S. mortgage rates continue to rise. According to data released by Freddie Mac in the United States, the average interest rate on 30-year fixed mortgages has risen for seven consecutive weeks, reaching 7.40% on October 8, a new high in the past three years. Compared with falling to 5.98% in February this year, it has risen by 1.42 percentage points in more than 7 months.
●Mortgage monthly payment soared, and the dream of buying a house was put on hold.
The rise in mortgage interest rates directly increases the monthly repayment burden of home buyers. Jesse, a rental apartment property manager in Southern California, said that a friend who rents a house was originally planning to buy a house, but after a period of time, the mortgage interest rate rose from the original estimate of about 5% to more than 7%.
After careful calculation, this friend found that the monthly mortgage burden would increase from approximately US$6,000 (approximately NT$192,000) to US$8,000 (approximately NT$255,000). In the end, he decided to give up buying a house because he was unable to afford it. In Southern California, where housing prices often exceed one million dollars, a slight change in mortgage interest rates may increase homebuyers' monthly expenses significantly.
The most common reason why renters move out of their apartments is usually to buy a house. Jesse observed that with current house prices remaining high and mortgage interest rates continuing to rise, many tenants choose to continue renting a house, and some have begun to find roommates to share, or are looking for areas with lower living costs. "Now things have become more expensive, including gasoline, food, and the overall cost of living, but salaries have barely changed."
Not only renters are budgeting carefully, but people who already own homes are also beginning to recalculate the cost of upgrading their homes. Faced with high housing prices and high mortgage interest rates, some homeowners would rather invest in renovating their original homes than sell their old homes and buy new ones with high interest rates.
●The cost of house replacement is high, adding old houses into new options
Jonathan Chang, a residential decoration contractor in Irvine, California, led a Central News Agency reporter into a residential construction site. This house, which is about 50 years old, is undergoing large-scale renovation. It was originally a 4-bedroom, 2-bathroom layout. The owner decided to build an additional space of about 31 square meters. After completion, it will be expanded to 5-bedrooms and 4-bathrooms. The house is planned to be an independent rental space to increase rental income.
Zhang Zheming said that many homeowners who bought their houses in the early years, although the value of their houses have increased significantly, if they want to upgrade to a larger house, in addition to having to pay higher house prices, they also have to bear high interest rates on mortgages and possible increases in housing taxes.
He gave the example of a house purchased for US$500,000 (approximately NT$15.96 million) and now worth US$1.5 million (approximately NT$47.88 million). If you want to replace it with a larger house, you may have to spend US$2 million to US$2.5 million (approximately NT$63.84 million to NT$79.8 million). Instead of investing a large amount of money to replace the house, it is better to use the existing land to build an extension to make the original house more suitable for the needs of the family.
He observed that with high housing prices and high interest rates, homeowners' demand for renovation projects has also changed. Non-essential minor renovations, such as replacing floors and renovating bathrooms, have declined, but inquiries about projects such as adding living space and making accessory dwelling units (ADUs) available for rent are still quite high.
●Buyers are bargaining, sellers are reluctant to sell, and the housing market is on the sidelines.
In South Pasadena, Southern California, real estate agent Alex Hung led reporters from Central News Agency to visit a vacant land for sale. The land is located on a hillside, climbing up a steep slope and overlooking the cityscape. Despite the beautiful scenery, it has been on the market for more than a year and has yet to find a buyer.
Hong Changwei observed that currently both house prices and mortgage interest rates remain high. Buyers are bidding more conservatively, but some sellers are unwilling to lower prices because after selling their existing houses, they must also face high interest rates when replacing their houses. "So it's a little bit stuck." He described that the current housing market is not that there are no transactions at all, but that both buyers and sellers are waiting and watching.
High mortgage rates are also causing sellers to adjust their asking prices. According to the latest statistics from the U.S. real estate website Realtor.com, 20.8% of listed residences in the United States had reduced prices in September, which is equivalent to 1 in every 5 houses. The proportion has reached a new high since October 2022.
Faced with the current price reduction trend, Hong Changwei observed that except for a few prime locations, buyers often ask for price reductions from the beginning. If the seller is unwilling to make concessions, the buyer would rather wait and see for the time being, waiting for a better price.
●Reducing prices to attract investors, adding pressure to the housing market at the end of the year
Real estate agent Aria Hsiao pointed out that some sellers started to lower their selling prices after finding a lukewarm response from buyers about two weeks after the listing. If there is still no interest after the price reduction, the price may be further reduced to attract investors who are interested in purchasing the house and renovating it themselves.
For sellers, instead of spending money on renovations first and not being sure whether they can get a better price, it is better to sell at a lower price and save renovation costs.
Entering the fourth quarter of this year, Thanksgiving and Christmas holidays will soon come. Xiao Yuqing said that the end of the year is usually the off-season for the housing market. In this season of family reunions, people usually do not move at this time. This year, high mortgage interest rates have made it more difficult for buyers to sell, and sellers are unwilling to give up their original low-interest mortgages. (Editor: Tang Peijun) 1151011
