In some eyebrow-raising news, mortgage rates have recently shot up to their highest point in 23 years, and it’s got folks in the housing market feeling a bit jittery. Despite the surge in interest rates, home prices are hanging tough, and that’s creating a bit of a conundrum in the housing scene.
Here’s the lowdown:
- Mortgage rates are on the upswing, with the 30-year fixed-rate mortgage averaging 7.31% this week, a big leap from the previous 7.19%.
- Economic signals are pointing towards these higher interest rates sticking around for a while.
- Seasonal factors might cause home prices to dip in the next few weeks, which could persuade cautious buyers to make their move.
- The current mortgage rates haven’t been this high since way back in 2000.
According to the latest Freddie Mac survey, the average 30-year fixed-rate mortgage is now sitting at 7.31%, a noticeable bump from last week’s rate of 7.19%. The 15-year fixed-rate mortgage is also seeing an uptick, clocking in at 6.72%. If you want the most recent scoop, Mortgage News Daily reports a daily rate of 7.62% as of September 28.
What’s interesting is that when interest rates were similar to what they are now, two decades ago, home prices took a nosedive. But today, it’s a different story, with home prices continuing their upward trajectory, as noted by Sam Khater, the Chief Economist at Freddie Mac. This has made both buyers and sellers a bit hesitant, as they’re holding out for more favorable conditions.
This hesitation is reflected in the dip in pending home sales, which saw a 7.1% drop in August, giving us a sneak peek at what might be in store for the housing market this fall.
So, why the spike in mortgage rates? Blame it on the Federal Reserve’s updated economic outlook, which suggests we’re in for a longer period of higher short-term interest rates, according to Lisa Sturtevant, the Chief Economist for Bright MLS. This outlook paints a picture of a slowdown on the horizon for the real estate market.
Sturtevant warns that this report on rising mortgage rates, combined with other indicators, is signaling that the seemingly unstoppable housing market might finally be losing some steam.
While there’s a glimmer of hope for buyers and real estate agents in the form of falling home prices during this time of year, don’t hold your breath for major price drops. Danielle Hale, the Chief Economist at Realtor.com, points out that even though 7%+ mortgage rates might put a damper on sales, it doesn’t necessarily mean prices will take a nosedive.
Still, some buyers might decide to take the plunge, fearing that rates will climb even higher if they wait too long.
But the housing market is grappling with more challenges beyond higher interest rates and soaring home prices. Rent prices are starting to level off, and in almost all major U.S. markets studied, buying a starter home is now pricier than renting.
All these factors are having an impact on mortgage applications, with the latest survey by the Mortgage Bankers Association reporting a 1.3% drop after a recent uptick.
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