Average Mortgage Rate Hits 20-Year High at 7.09%

August 18, 2023, from Floor Focus FloorDaily News

Washington, DC, August 18, 2023 – “The average mortgage rate rose to 7.09%, its highest level in more than 20 years, according to data released Thursday by mortgage giant Freddie Mac,” according to the Wall Street Journal.

“The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%.

“The housing market is the part of the economy hit most directly by the Federal Reserve’s high-rate policies. The resulting slowdown in refinancing and purchase activity has battered some mortgage lenders, leading to tens of thousands of layoffs in the industry and weighing on economic growth.

“Mortgage rates aren’t directly tied to the central bank’s moves. But they tend to move loosely with the 10-year Treasury yield, which on Thursday hit its highest level since 2007. Some analysts see ample room for the 10-year yield to keep climbing as markets brace for the possibility that rates aren’t going to decline soon.

“Stocks fell on Thursday, extending August declines, with investors worried anew about continued Fed rate hikes. Fed officials still see inflation risks and the potential need for higher interest rates, according to meeting minutes released this week.

“When the Fed started lifting interest rates at a rapid clip last year, the rising cost of borrowing to buy a home was expected to be temporary. A year and a half on, rates are climbing back toward their highs, despite briefly dipping toward 6% in late 2022 and early 2023.

“Now, buyers, sellers, investors and real estate players are adjusting to the idea that higher rates are here to stay, or at least here to stay longer than they were expecting.

“While lots of would-be buyers are struggling to find anything they can afford, plenty of would-be sellers feel stuck in place. Many homeowners are unwilling to put their homes on the market, fearful of giving up low-rate mortgages and being forced to take out loans that are much more expensive. High-rate homeowners who bought recently and were hoping they could soon refinance are coming to grips with the fact that they’ll have to wait a while.

“Some buyers have given up, deciding to rent for longer than they had planned. But even with fewer interested buyers, a lack of supply keeps pushing prices higher. The buyers that remain are still competing fiercely for the measly stockpile of homes for sale.

“Blaine Wheeler, 26, and his wife have been looking for a home in Lee’s Summit, Mo., for about six months. Homes in their budget of $250,000 to $350,000 have been hard to come by. When one does come on the market, it tends to get swarmed with interested buyers.

“‘It’s almost to the point where if you’re not ahead of the market, you’re behind the market,’ said Wheeler, who is a recruiter for the energy industry. ‘We want to move life forward in a sense, but we also don’t want to make a decision we regret.’

“The median existing-home price was over $410,000 in June, according to the latest available data from the National Association of Realtors. That was down slightly from the peak reached a year earlier, but still the second-highest price ever recorded.”