According to Freddie Mac, 30-year fixed-rate mortgages averaged 5.54% for the week leading up to July 21, up from 5.51% last week. This is significantly higher than last year’s 2.78%.
“The housing market remains sluggish as mortgage rates have risen for the second straight week,” said Sam Carter, chief economist at Freddie Mac. “Consumer concerns about rising interest rates, inflation and a potential recession are manifested in softening demand. As a result of these factors, we expect house price increases to ease significantly.”
According to the Mortgage Banking Association, mortgage demand has fallen to higher interest rates as loan applications have fallen to their lowest levels in 22 years.
Joel Kang, MBA’s Vice President of Economics and Industry Forecasting, said:
All eyes on the Federal Reserve
The Federal Reserve does not set interest rates for borrowers to pay directly on mortgages. Fees tend to track 10-year US Treasury bonds. However, mortgage rates are indirectly affected by the Fed’s actions against inflation. When investors see or anticipate rate hikes, they often sell government bonds. It sends higher yields, along with mortgage rates.
As a result, this week the spread between 2-year Treasury bonds and 10-year Treasury has moved to an even more negative territory.
Buyers reaching the “affordable cap”
For future buyers, sharp rises in prices and rising mortgage rates have created affordable caps, Latiu said.
“Many Americans are aware that they don’t have enough money to buy a home that meets their needs,” he said.
A year ago, a buyer who reduced a home with an average price of $ 390,000 by 20% and financed the rest with an average of 2.78% on a 30-year fixed rate mortgage had a monthly mortgage payment of $ 1,279. Freddie Mac.
Today, homeowners who buy an average 5.54% home of the same price will pay $ 1,779 per month in principal and interest. That’s $ 500 more every month.
Increased financial costs mean fewer homes are available to entry-level buyers. According to home search sites, households with an annual income of $ 75,000 can only buy 23% of Realtor.com’s active list.
“People who can’t afford a home don’t really benefit from the rental market,” Latiu said. “It’s becoming increasingly clear that the real estate market is heading for corrections in the coming months.”