Continued economic growth and persistent inflation are causing mortgage rates to rise again, which exceeded 7% on Thursday. Economists say it could be some time before they start ticking back.
Thank you for reading this post, don't forget to subscribe!The 30-year fixed-rate mortgage rose 16 basis points to 7.10% on Thursday, March 2, from Wednesday’s 6.94.
latest survey by Freddie Mac The 30-year fixed-rate mortgage measured at 6.65% for the week ended Thursday, higher than the 4.0% held by the 10-year Treasury.
The higher level of rates comes after a period of relative optimism in January and early February, when the 30-year fixed rate fell on expectations of lower economic growth, lower inflation and a loosening of monetary policy. But recent consumer price reports and a strong jobs market have had a boomerang effect on mortgage rates, said Sam Khater, chief economist at Freddie Mac.
“Low mortgage rates in January brought buyers back into the market. Now that rates are rising, affordability is being constrained and potential buyers are finding it difficult to act, especially at less than half of current rates For repeat buyers with existing mortgages,” he said.
Investors are expecting inflation to remain elevated for a longer period of time, which would require the Federal Reserve to continue raising its policy rate. The Fed indicated that it watches the impact of its monetary tightening on price growth, but with a strong job market, wages continue to outpace consumers.
Also, consumers have taken on record debt, including mortgage, personal, auto and student loans. Furthermore, the personal savings rate has declined significantly from pandemic highs, as higher prices are squeezing household budgets. With rising interest rates, the financial burden is expected to increase, making consumer choices more difficult in the coming months.
This has essentially frozen the market, especially for buyers who were considering making the jump but may have missed the small window in winter, when rates fell as low as 5.99% for a day.
“Applications have definitely slowed down over the past few weeks. I think we have some people on hold again,” said a loan officer in the Portland, Oregon market. “I have a borrower who applied last week. Made an offer but withdrew this week when it saw the rate was closer to 7%. He wants to wait and see where interest rates go.
Economists said if mortgage rates remain in the high 6s, low 7s, home prices will have to drop below average to shock the market.
“At today’s rates, home prices would fall by 30% for homebuyers who are buying a median-priced home, for the same monthly payments they would have made a year ago,” said Lisa Sturvetant, chief economist. bright mls, “So why aren’t house prices falling more? While prices are below their summer peak and price increases have declined significantly, the median home price nationally is still slightly higher than it was in early 2022. There are two reasons for this price stability – record low inventory and record high equity. Buyers are still competing for very few homes on the market which keeps upward pressure on prices. At the same time, repeat buyers are able to roll significant housing equity into their home purchase, essentially ‘buying down’ the higher rate to make their new home purchase more affordable.
The LO in the Portland, Oregon area said she is trying to get creative in helping customers shop around for 3/2/1 and 2/1 mortgage rates.
“But with all the volatility it has been a struggle to get sellers to give the credit they need for those programs. If rates stay high for a while, I believe that will change. I’m hearing from realtors that Some portfolio lenders are offering 5/1 or 5/6 ARMs in the low 5% range that they will keep on their books until things settle in. It’s hard to compete.
He added: “The new AMI (Regional Average Income) programs are great for first-time home buyers because they forgive all new LLPAs tied to conventional loans. We just have to make sure they meet the AMI for that county. Meet the 100% income limit of where the home is. To me, this looks to be the most promising program right now for conventional loans.
Additional data on inflation and jobs will come on March 10 and 14.
