– Mortgage rates on the 30-year fixed-rate mortgage have surpassed 8% and are at their highest since 2007.
– This increase in rates is impacting affordability and making it difficult for first-time homebuyers to attain homeownership.
– Homebuilders are also feeling the impact as rising rates are leading to a decrease in construction and a decline in builder confidence.
– The Mortgage Bankers Association expects rates to level off and fall in the next quarter, providing some relief for potential homebuyers.
– However, inventory remains a major issue in the housing market, with existing home sales still down and homeowners hesitant to list their properties due to high borrowing costs.
Per Mortgage News Daily, mortgage rates touched 8.03% on Wednesday, up from 7.69% the previous week. HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate for conventional loans at 7.78% on Wednesday, compared to 7.52% the previous week.
Both indexes showed higher rates than the Freddie Mac‘s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, and recorded the 30-year, fixed-rate mortgage at 7.63% as of Oct. 19, up 6 basis points from the prior week. By contrast, the 30-year, fixed-rate mortgage was at 6.94% a year ago at this time.
Mortgage rates in the 8% range are further impacting already strained levels of affordability, Sam Khater, Freddie Mac’s chief economist, said in a statement.
“In this environment, it’s important that borrowers shop around with multiple lenders for the best mortgage rate,” Khater said. “With research showing down payment is the single largest barrier to first-time homebuyers attaining homeownership, borrowers should also ask their lender about down payment assistance.”
While high rates are stifling homebuyers, homebuilders are feeling the brunt as well, Khater noted.
“Incoming data shows that the construction of new homes rebounded in September but as rates keep rising, home builders appear to be losing confidence. As a result, we expect construction to trend down in the short-term,” he said.
Bob Broeksmit, the president and CEO of the Mortgage Bankers Association, said the organization expects rates to level off and fall over the next quarter.
“Mortgage application activity is now at its lowest level in 29 years as high mortgage rates, limited housing inventory, and affordability challenges continue to constrain borrowers,” he said in a statement. “While 2023 has been a tough time for the housing market, MBA expects that mortgage rates will moderate heading into 2024, which should bring some relief to those looking to buy a home.”
Still, inventory remains a huge problem for the housing market. Though inventory has ticked up of late, existing home sales are still down double-digits from last year and many homeowners are reluctant to give up sub 4% rates when borrowing costs are so high.
“With mortgage rates remaining near their 20-year high in recent weeks, homeowners are hesitant to list their properties,” Jiayi Xu, economist at Realtor.com said.
Property Chomp’s Take:
The recent news about mortgage rates reaching 8% has caused quite a stir in the housing market. According to reports, the rise in rates is a result of the Treasury yield surpassing 4.9% for the first time since 2007. This increase has impacted both potential homebuyers and homebuilders.
For homebuyers, the higher mortgage rates have made affordability even more challenging. Sam Khater, Freddie Mac’s chief economist, has stated that the 8% range is further straining levels of affordability. In this situation, it becomes crucial for borrowers to shop around and compare rates from multiple lenders to find the best mortgage rate. Additionally, borrowers should inquire about down payment assistance programs, as down payment remains a significant barrier for first-time homebuyers.
On the other hand, homebuilders are also feeling the effects of the rising rates. As rates continue to climb, homebuilders are losing confidence. In fact, the builder confidence index recently fell to its lowest point since January 2023. This decline in confidence is expected to lead to a decrease in construction activity in the short-term.
However, there is some hope on the horizon. Bob Broeksmit, the president and CEO of the Mortgage Bankers Association, predicts that rates will eventually level off and fall in the next quarter. This could bring relief to those looking to buy a home. Nevertheless, the housing market still faces challenges, particularly in terms of inventory. Existing home sales are down double-digits from last year, and homeowners are hesitant to list their properties due to the high borrowing costs.
In conclusion, the rise in mortgage rates to 8% has had significant impacts on the housing market. Affordability has become more challenging for homebuyers, and homebuilders are losing confidence. However, experts believe that rates will eventually stabilize and start to decrease, providing some relief to potential homebuyers. Despite this, the housing market still faces obstacles, such as inventory shortages. As the situation continues to evolve, it is essential for individuals to stay informed and make informed decisions when it comes to mortgages and homeownership.