The 30-year fixed-rate mortgage was 5.55% for the week ending Aug. 25, up from 5.13% the week before, said Freddie Mac. This is significantly higher than this time last year when it was 2.87%.
The combination of higher mortgage rates and slowing economic growth is weighing on the housing market, said Sam Khater, chief economist at Freddie Mac.
“Home sales continue to fall, prices are moderate and consumer confidence is at a low,” he said. “However, amid waning demand, there are still potential homebuyers waiting to return to the market.”
“The expectation is that he will highlight the central bank’s commitment to continued tightening for the rest of the year,” Mr. Ratiu said. “Continued Fed rate hikes, combined with balance sheet reductions through mortgage-backed stock price cuts is expected to continue to put upward pressure on mortgage rates. .”
For the rest of this year, consumer confidence and resilience to higher prices, he said, are key to keeping the US economy moving and avoiding a recession.
The upside for prospective buyers is that the housing market is offering more and more homes at a discount. But there’s also been a drag on sellers putting their homes on the market, further easing an already tight inventory of homes.
That’s unsettling, Ratiu said.
Amid clear signs that affordability is curtailing demand, some homeowners may fear they’ve missed the peak of the market, says Ratiu. “With the property market still competing with significant construction under construction, plus construction companies cutting back on single-family operations, the transition towards a more balanced equal is fading away.”
Mortgage affordability improved over the past month
After soaring in the first half of the year, new mortgage payments fell slightly in July compared with June, according to a survey from the Mortgage Bankers Association.
The national average payment was $1,844 a month in July, down $49 from June when it was $1,893. However, monthly payments are still up $461 in the first seven months of the year – up 33.3% since January.
The relative improvement in affordability in July came as mortgage rates fell slightly and loan sizes were smaller, leading to lower monthly payments.
“Demand among homebuyers has declined this summer, driven by prolonged economic uncertainty, high inflation and interest rates,” said Edward Seiler, MBA vice president for housing economics and chief executive officer of Research. Mortgage rates remain high, causing many potential buyers to delay their home search.” American Housing Institute. “The combination of a strong job market and moderate home price growth could entice some of these buyers back in the coming months.”
However, mortgage costs are significantly higher than they were a year ago, reducing the purchasing power of buyers. In addition, rising home prices and inflation are taking a large part of the income of prospective homebuyers.
A year ago, a buyer took 20% off a home that averaged $390,000 and financed the rest with a 30-year fixed-rate mortgage with an average interest rate of 2.87%. had a monthly mortgage payment of $1,294, according to the numbers. from Freddie Mac.
Today, a homeowner buying a similarly priced home with an average interest rate of 5.55% will pay $1,781 a month in principal and interest. That’s an extra $487 per month.
