A surge in borrowing costs to a two-year high is starting to cool demand from homebuyers as higher rates are combining with surging prices to reduce affordability, Bloomberg News reported Friday. The biggest pinch is being felt in expensive markets such as Seattle and New York, where budgets were already stretched, leading to a more uneven national recovery. Contracts to buy previously owned homes fell 1.3 percent last month, the biggest decline this year, the National Association of Realtors reported last week. They slid 6.5 percent in the Northeast and 4.9 percent in the West, the data showed. The figures came on the heels of data that July new-home sales plunged 13.4 percent. Home-loan applications for purchases have declined 14 percent since the start of May, when interest rates surged by the most in two decades, according to the Mortgage Bankers Association, and price appreciation has slowed, albeit from the fastest pace in seven years. Higher rates take the “edge off the froth,” said Jonathan Miller, president of New York-based appraiser Miller Samuel Inc. “You can’t sustain annual price growth in excess of 12 percent when income is flat, credit is tight and unemployment is elevated,” he said. “Those are boom price trends.”
