US mortgage rates jumped this week, with the 30-year fixed rate hitting its highest level in more than 21 years, further complicating the outlook for the housing market.
The average 30-year rate reached 7.09%, its highest level since April 2002, against 6.96% the previous week, mortgage finance agency Freddie Mac said on Thursday. It is almost 2 percentage points higher than its level in the same period last year.
The average 15-year rate also rose to 6.46%. This was up from 6.34% the previous week and the highest level since April 2002.
Meanwhile, the yield on the 10-year Treasury note – which serves as a benchmark for mortgage rates – rose to its highest levels in 10 months on Thursday, buoyed by fears that strong US domestic demand could prompt the Federal Reserve to raise interest rates again.
“The last time the 30-year fixed rate exceeded 7% was last November,” said Sam Khater, chief economist at Freddie Mac. “Demand has been impacted by headwinds related to affordability, but low inventory remains the primary cause of stagnant home sales.
The housing market was most immediately and severely affected by the aggressive tightening of monetary policy by the US central bank from 2022, but it has recently shown signs of stability. On Wednesday, the Commerce Department said construction of single-detached homes surged in July, amid an acute shortage of existing homes on the market.
However, high mortgage rates could temper recent construction trends, keeping supply tight and house prices high. Rising mortgage rates were blamed for lower homebuilder confidence in August.
“The housing market has been surprisingly resilient, beating last year’s forecasts,” said Bright MLS chief economist Lisa Sturtevant. “However, with prices still higher than a year ago in many markets, breaking through the 7% mortgage rate threshold again could be the starting point for a major contraction in the housing market this fall.
2023-08-17 18:07:47
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