Mortgage rates rise again, remain above 6%

Mortgage rates have risen by more than a quarter of a point this week and remain at their highest level in 14 years, offering no relief to sidelined homebuyers.

The average 30-year fixed mortgage rate increased to 6.29% from 6.02% last week, according to Freddie Mac, marking the highest point since the last week of October 2008. Rates are more than 3 points higher percentages compared to the beginning of the year.

Rapidly rising rates this year have only worsened what for many was an inaccessible housing market, forcing those would-be buyers to put their buying plans on hold. Those who remain, however, find it easier to negotiate with sellers than when the year began.

“For buyers who watch their take-home pay shrink due to higher prices and purchase budgets shrink due to rising interest rates, today’s housing market remains highly inaccessible,” he said in an e-mail address. mail to the press George Ratiu, head of economic research at Realtor.com. “In many locations, price cuts may be the only viable option to restore housing balance and affordability.”

Why have mortgage rates gone up?

The 30-year rate jump came as the Federal Reserve reiterated its firm commitment to curb runaway prices Wednesday after raising its short-term policy rate by three-quarters of a point as expected.

The 10-year Treasury yield, which fixed mortgage rates tend to follow, has jumped to its highest level since 2011 on those inflation-fighting expectations. Mortgage rates soon followed.

The Fed also began reducing the amount of mortgage-backed securities it holds on its balance sheet this month, according to Ratiu.

“These actions will ensure that mortgage rates continue to rise until inflation shows signs of more significant moderation,” wrote Rattiu.

Many buyers withdraw

In an aerial view, homes are seen in a residential neighborhood on September 15, 2022 in Pearland, Texas. (Photo by Brandon Bell / Getty Images)

Ever since mortgage rates began their rapid rise in earnest in March, buyers have abandoned exits.

The volume of mortgage requests is down 30% year-over-year, according to the latest data from the Mortgage Bankers Association, although activity recorded a small seasonally adjusted 1% increase week over week.

Sales of previously owned homes also fell for the seventh consecutive month in August, according to the National Association of Realtors, reducing the median list price for the second consecutive month. The price was $ 389,500 in August, down $ 24,000 from a record high of $ 413,800 in June, but still 7.7% more than a year ago.

According to Realtor.com, the monthly home payment at an average 30-year rate is about $ 900 more than it was a year ago, or nearly $ 11,000 more per year.

“Sixty percent of my clients who were pre-approved a few months ago want to wait to buy a house,” Scott Sheldon, a California branch manager for New American Funding, a mortgage lender, told Yahoo Money. “Those are all the people who were buying 10% down or less, so I can’t say I can blame them.”

Sellers lose some of their bargaining power

SAN FRANCISCO, CALIFORNIA - JULY 14: A sign is posted in front of a house for sale on July 14, 2022 in San Francisco, California.  The number of homes for sale in the US rose 2% in June for the first time since 2019. High interest rates, coupled with a faltering economy and rising home prices, have kept many out of the market. homebuyers.  (Photo by Justin Sullivan / Getty Images)

A sign is posted in front of a house for sale on July 14, 2022 in San Francisco, California. (Photo by Justin Sullivan / Getty Images)

Sellers have noticed the abrupt change in their market position.

About 11% of homes for sale suffered a price cut last month, according to data from Realtor.com, up 19.4% year-over-year and close to averages from 2017 to 2019. Fewer homes sold above the list price in August, according to a separate study by Redfin, with 35% requested above, down from 49% a year ago.

Home builders have also offered concessions as the buyer pool shrinks.

Nearly 25% of builders reported lowering the price this month, up from 19% in August, according to a monthly survey and index from the National Association of Home Builders, while half said they offered mortgage rate buybacks. and free services, including incentives to close sales.

This is some relief for buyers still in the market, Sheldon said, who are using their newfound bargaining power to deliver price cuts that offset the recent rate hike.

“Buyers who can handle the storm of higher temporary rates will be really good for their home. Every purchase we’re making has a price reduction or a price incentive,” Sheldon said.

But “it’s still challenging,” he added.

“Everyone is paying points, so the closing costs are no longer 2% to 2.5% of the purchase price, they are 3% to 3.5%. It’s additional money that they have to bring to the table to get the rate they want. wish “.

Janna is Yahoo Money’s personal finance editor. Follow her on Twitter @Janna Herron.

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