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lite.cnn.com - on gopher - inofficial
ARTICLE VIEW:
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Mortgage rates surge past 7%, reaching highest level since November
By Bryan Mena, CNN
Updated:
2:54 PM EDT, Thu April 18, 2024
Source: CNN
Mortgage rates soared this week, breaching the key 7% threshold and
extending America’s housing affordability crisis.
The 30-year fixed-rate mortgage averaged 7.10% in the week ending
April 18, up from 6.88% the previous week, according to Freddie Mac
data released Thursday. A year ago, the average 30-year fixed-rate was
6.39%.
Breaching 7% represents a psychological threshold that hadn’t yet
been crossed this year and adds to pressures buffeting the US housing
market during the crucial spring homebuying season.
Mortgage rates are climbing based on expectations that the Federal
Reserve won’t cut interest rates anytime soon. The Fed doesn’t
directly set mortgage rates, but its actions do influence them, and are
keeping the Fed on hold.
“As rates trend higher, potential homebuyers are deciding whether to
buy before rates rise even more or hold off in hopes of decreases later
in the year,” said Sam Khater, Freddie Mac’s chief economist, in a
statement.
In a separate report, the National Association of Realtors reported
that in a sign that homebuyers are waiting on the sidelines as they
contend with a tough housing market.
Americans might not get much of a break this year
Fed officials have already signaled they expect this year than they
previously thought, based on recent economic data showing that progress
on inflation has stalled. Some economists have floated the possibility
that the Fed might not cut rates this year at all — and a couple of
central bank officials have even mentioned the possibility of another
rate hike.
That has sent bond yields soaring. Mortgage rates track the benchmark
10-year US Treasury yield, which has risen to its highest level since
November at 4.637%. The Consumer Price Index for March came in ,
weighing on the stock market and also prompting forecasters to push
back their estimates for the first rate cut.
If inflation stalls further, or even worsens, mortgage rates could
climb higher.
“Homebuying is such a major decision that people have the calculator
in front of them. So if it’s 7.01% then it’ll be an emotional
shock, but nonetheless I think they’re going to plant a number into
the calculator and see whether their monthly payment is manageable or
not,” NAR chief economist Lawrence Yun said on a call with reporters
Thursday.
Home buyers are being stymied not just by high mortgage rates, but also
by elevated home prices nationwide.
The median price of an existing home was $393,500 last month, NAR
reported Thursday, an increase of 4.8% from a year earlier. That was
the highest March price on record. February prices also reached a
record high. Today’s housing market is tough by many measures, but
Americans are also enjoying one of the strongest job markets in
history.
A persistent undersupply of housing
A lack of inventory has been a longstanding issue for America’s
housing market.
That has slowly improved in recent months, rising 4.7% in March from
the prior month and up 14.4% last month year-over-year, according to
NAR data. But housing supply overall still isn’t keeping up with
demand, which is weighing on affordability.
“We need more inventory, definitely, for the health of the market,”
Yun said.
Homeowners who locked in a low mortgage rate before the Fed began to
hike rates in 2022 have largely preferred to not sell their homes. Yun
has said previously that life changes such as marriage, divorce and new
children could eventually force those homeowners to just give up on
waiting for mortgage rates to fall and sell their homes.
At the current pace of sales, it would take 3.2 months to exhaust the
current level of homes on the market, up from 2.9 months in February
and 2.7 months in March 2023.
Uncertainty over NAR settlement
There is also lingering uncertainty over the historic NAR settlement
that was announced in March and is expected to change how homebuyers
and sellers pay their real estate agents. It hasn’t been approved by
the courts yet, but it is already changing the behavior of home
shoppers and sellers — even before new rules take effect in July.
Yun said first-time buyers trickled back into the market last month
“because people heard about the lawsuit settlement where the buyers
possibly need to come up with extra funds to pay for professional
representation, but they want to do it before the new rules take
place.”
Prospective homebuyers have told CNN they’re hopeful that the
settlement will mean lower homes prices, offsetting the pain of
elevated mortgage rates, but many Realtors say there are many unknowns.
“This is unchartered territory,” Debra Dobbs, a Realtor in Chicago,
of the potential new rules.
This story has been updated with additional developments and context.
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