Home Buyers Beware: Mortgage Rates Fixed Above 7% for Over a Month
This week marked another period of stubbornly high mortgage rates, persisting above the 7% threshold due to a higher-than-anticipated core inflation in August.
An Uphill Trend: Mortgage Rates Climbing Weekly
According to the latest data from Freddie Mac, the average rate for a 30-year fixed mortgage climbed slightly to 7.18% this week, a hike from the previous week’s 7.12%. This stretch of high rates has continued unabated for five consecutive weeks. Industry insiders are predicting this trend to persist, at least in the near term, as financial markets keenly await the Federal Reserve’s stance on interest rates scheduled for announcement next week.
Experts Advise Bracing for Continued High Rates
Unfortunately for potential homebuyers, a reprieve seems distant. Keith Gumbinger, the Vice President of HSH.com, shared his perspective with Yahoo Finance, emphasizing the unlikely possibility of immediate positive changes in the mortgage landscape. While no spike in policy rates is expected in the upcoming Fed meeting, Gumbinger does not rule out another hike within the year given the sustained strength in growth, labor markets, and inflation, despite the prevailing high interest rates.
The Homebuyer’s Dilemma: High Rates Deter Demand
The ripple effect of the soaring mortgage rates is evident in the dwindling homebuyer demand. Bob Broeksmit, the President and CEO of the Mortgage Bankers Association, highlighted a significant dip in mortgage applications earlier this month, hitting lows last witnessed in 1996. The steep rates have fostered a hostile environment for prospective buyers, with affordability and housing inventory pressures driving them to the sidelines. Moreover, current homeowners find little motivation to refinance under the present conditions.
Selling Homes: A Less Appealing Choice for Homeowners
The repercussions of the escalated mortgage rates are affecting homeowners contemplating selling their properties. The prospect of relinquishing their existing mortgage rate for one potentially double deters many, constricting the supply of affordable homes in the market. Recent figures from Altos Research underscore this trend; new contracts took a hit, registering at 54,000 in the last week, a drop from 64,000 just a week before, and substantially lower compared to statistics from previous years.
Mike Simonsen, CEO of Altos Research, painted a stark picture of the current scenario in the Altos blog. He noted a clear constraint on both supply and demand, with a significant uptick in sales volume seeming unlikely in the near future.
Home Prices Remain Steady Amid Fluctuating Demand
Despite the decreased demand, the dearth of inventory has inadvertently buoyed home prices. Altos Research reported a median home price of $444,990 in the week ending September 11, marking a 1% increase year over year. Meanwhile, the pricing of freshly listed homes remained stagnant at an average of $390,000 compared to last year’s figures.
