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Mortgage rates rise again, pushing the price for most buyers out of the housing market

According to Freddie Mac, the 30-year fixed rate mortgage averaged 5.81% for the week ending June 23.

This time last year, rates averaged 3.02%, and last time rates were higher in the winter of 2008.

“Fixed mortgage rates have risen by more than two full percentage points since the beginning of the year,” Sam Kater, chief economist at Freddie Mac, said in a statement. “The combination of rising prices and higher home prices is a potential driver of the recent downturn in existing home sales. However, in reality, many potential home buyers are still interested in buying a home, keeping the market competitive but flat for the past two years. Red-hot activity.”

Despite the jumps, mortgage rates have remained below their historic highs of the past 40 years – notably in October 1981, a record 18.63% average rate.

Still, the intensity of the current mortgage rate increase will ultimately make consumers more cautious with the increase in borrowing costs, said Abbe Omodunbi, associate vice president and senior economist at PNC Financial Services Group.

“I think we are likely to see further increases in mortgage rates for the rest of the year,” Omodunbi said in an interview with CNN Business. “The Fed wants to see housing activity soften.”

The Federal Reserve does not set interest rates on mortgages directly on mortgages, but its actions affect them. Mortgage rates tend to track 10-year US Treasury bonds. But rates have been indirectly affected by the Fed’s measures on inflation. When investors see or expect a rate hike, they usually sell government bonds, which translate into higher yields and mortgage rates.

At its policy briefing last week, the Fed raised its benchmark interest rate by 75 basis points, the largest increase in three decades. In public comments, including testimony before Congress, Fed President Jerome Powell said the central bank’s actions should help reduce demand in the nation’s housing market, which is running hot.

Home prices have skyrocketed over the past two years with record-low mortgage rates, epidemic-related immigration patterns, the impact of investment firms buying residential properties and the Fed’s purchase of mortgage bonds.

Rent and home prices continue to rise in both areas.

“Housing prices should stop rising at such a remarkable rapid rate,” Powell said at a hearing before the Senate Banking Committee on Wednesday. “Since the beginning of the epidemic, we have had a very hot … housing market across the country. As the demand for housing medians … you have to see prices rise.”
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Still, the flip side of high mortgage rates and record home costs in high-inflation environments could ultimately drive up the price as millions of Americans own a home, the Housing Report of Harvard University’s annual State of the Nation released Wednesday.

A year ago, a buyer who reduced 20% on an average price of $ 390,000 home had a monthly mortgage payment of $ 1,673 at an average 3.02% interest rate with a 30-year fixed rate mortgage. Numbers by Freddie Mac.

At today’s 5.81% rate, the monthly mortgage payment on the same home is $ 2,187, a difference of $ 514.

Housing is already transitioning to a “new normal after the epidemic,” said George Raty, Realtor.com’s economic research manager. Rent for the 15th consecutive month has reached record highs, but growth is slowing, with house price gains also declining, he said.

“Market prices will continue to adjust to a smaller pool of qualified buyers and higher financing costs,” he said in a statement. “Moving from a more heated real estate market to a more sustainable one will take some time. Finally we need to look for a healthier environment with more options and better value for many buyers.”

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