Mortgage Rates Rise Amid Cooling Inflation: Freddie Mac Report
According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage rose to 6.96% for the week ending July 13, up from last week’s average of 6.81%. Similarly, the average rate for a 15-year fixed-rate mortgage increased to 6.30% from last week’s average of 6.24%.
Freddie Mac’s Chief Economist, Sam Khater, noted that mortgage rates have reached their highest level since November 2022 when rates exceeded seven percent. Despite indications of softening inflation based on recent data, Khater pointed out that housing costs, which contribute significantly to inflation, remain persistently high due to limited inventory in relation to demand.
Data from Redfin reveals that the median home-sale price in the United States increased by 1.5% compared to the previous year during the four weeks ending on July 9. This marks the first price increase in nearly five months. Redfin also highlights the challenge faced by potential homebuyers in the form of lower inventory, with new listings down 27% year over year and the total number of homes on the market down 14%, the largest drop since March 2022. Many potential sellers are holding back due to the allure of low mortgage rates, with nearly all homeowners currently enjoying rates below 6%.
Despite these trends, it is still possible to find favorable mortgage rates by exploring different options. Platforms like Credible allow individuals to compare rates without impacting their credit scores.
Cooling Inflation May Impact Home Prices
In June, the Consumer Price Index, a widely used measure of inflation released by the Bureau of Labor Statistics, showed a year-over-year increase of 3%. This marked a decline from its peak of 9.1% in June 2022, and a decrease from the 4% annual inflation rate observed in May.
Redfin Economic Research Lead, Chen Zhao, stated that this month’s inflation report is likely to lead to a slight decrease in mortgage rates from their recent highs. It indicates that the Federal Reserve’s interest rate hikes are having an effect and increases the likelihood that they will only raise rates once more this year.
Zhao emphasized that the decline in mortgage rates is welcome news for buyers, as elevated rates have contributed to the challenges of high monthly housing payments and low inventory. However, Federal Reserve Chair, Jerome Powell, mentioned the possibility of two more interest rate hikes, although some economists advise against it.
Moody’s Analytics Chief Economist, Mark Zandi, expressed optimism about the report on consumer price inflation, stating that inflation is definitively slowing down. While he acknowledges that today’s report may overstate the case, there is a strong argument that inflation is moving in the right direction. Zandi suggests that the Federal Reserve should reconsider the necessity of further rate hikes.
For those seeking low mortgage rates, it is advisable to explore various options. Platforms like Credible provide personalized rates without impacting credit scores.
Homebuyers Express Regret Over High Home Prices and Mortgage Rates
A survey conducted by Clever Real Estate revealed that many homeowners had doubts about their home purchase in 2023 due to soaring home prices and mortgage rates. Approximately 93% of homebuyers expressed regrets about their recent home purchase, with over half (58%) believing their home was overpriced. Many also faced challenges in keeping up with their mortgage payments.
George Ratiu, Chief Economist at Keeping Current Matters, highlighted the significant increase in monthly payments for homebuyers. For instance, in early 2022, a buyer of a $500,000 home with a 20% down payment and an average rate of 3.1% faced a monthly payment of $1,700 (excluding taxes and insurance). Today, a buyer of a similarly priced home is confronted with a $2,500 monthly payment, reflecting a substantial difference.
Redfin’s recent analysis revealed that affordability concerns have taken a toll on Americans. The analysis noted that a homebuyer with a monthly budget of $3,000 can now afford a $450,000 home at the current average rate. However, this represents a loss of $30,000 in purchasing power since February, when the same budget could have bought a $480,000 home at an average rate of around 6%. The decline is even more pronounced when compared to a year ago when a $3,000 monthly budget could have purchased a $510,000 home at a rate of approximately 5.3%.
For those aspiring to become homeowners, it is advisable to compare different options to find the best mortgage rate. Platforms like Credible provide the opportunity to consult with personal loan experts and have questions answered.