Mortgage rates in the United States have been on a steady rise for seven consecutive weeks, hitting an average of 7.79% for a 30-year fixed-rate mortgage, according to Freddie Mac’s data. This is the highest level since October 2000 and marks the longest consecutive increase since Spring 2022. The 15-year fixed-rate mortgage also saw a rise to 7.03% from last week’s 6.92%.
The surge in rates is attributed to a stronger-than-expected economy with gross domestic product (GDP) growing at a real rate of 4.9%. However, this economic strength is likely to continue pressuring rates upwards.
This trend has triggered significant affordability issues, particularly for potential homebuyers in California, where there has been a 26% payment increase in 2023. The median sales price for a home in September was $843,340, compared to the December 2022 median of $774,850.
Freddie Mac’s Chief Economist, Sam Khater, expressed concerns over this trend deterring potential homebuyers due to mounting affordability issues. He emphasized that lower rates and increased inventory are required to address the current stagnation in home purchases.
Despite the majority of available homes being newly built, leading to a 12% year-over-year increase in new home purchases, economists warn that rising mortgage rates and tighter financial conditions may depress economic growth. GDP in Q1 2024 is expected to grow at less than 2%.
Selma Hepp, CoreLogic’s chief economist, acknowledged the positive impact of Federal interest rate policy on inflation and unemployment but cautioned about higher mortgage payments for new homebuyers.
Freddie Mac’s mission of promoting nationwide home ownership through market liquidity, stability, affordability, and equity remains critical amidst these circumstances. Further insights into these real estate trends are available in the “Home Stretch” newsletter.
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