Home BusinessMarket No Relief in Sight: High Mortgage Rates Are Sticking Around

No Relief in Sight: High Mortgage Rates Are Sticking Around

by Joshua Garcia

Mortgage rates are expected to reach another multidecade high, further increasing the costs of homeownership. Freddie Mac’s weekly mortgage rate has been above 7% since mid-August, and it is likely to notch its third multidecade high of the year. The recent surge in Treasury yields has already caused other sources of mortgage rates to record new highs. Lawrence Yun, the National Association of Realtors’ chief economist, predicts that mortgage rates could reach 8% in the short-term. Rising mortgage rates are negatively impacting affordability, with the average buyer needing to devote about 35% of their wages to purchasing a median home, the highest share since 2007. Every one-percentage point increase in mortgage rates prices an additional three million households out of the housing market. Data from the mortgage bankers group shows that applications for home purchase loans remain near a 28-year low. While rising mortgage rates may not necessarily cause home prices to fall, newly built homes may suffer. Home builders’ ability to offer discounted prices and rate buy-downs for new builds has started to wane, and home builder sentiment has fallen. Overall, a mix of headwinds and tailwinds are likely to keep housing costs in a holding pattern for the rest of the year, with the potential for fluctuations depending on factors such as inflation and stock market declines.

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