Mortgage rates just keep on soaring, making it more and more expensive to buy a home.
The 30-year, fixed-rate mortgage averaged a 20-year high of 6.92% in the week ended Oct. 13, jumping from 6.66% last week and 3.05% a year earlier, according to Freddie Mac.
“We continue to see a tale of two economies in the data,” said Sam Khater, Freddie Mac’s chief economist. On the positive side, “strong job and wage growth are keeping consumers’ balance sheets positive,” he said.
But on the negative side, “lingering inflation, recession fears and housing affordability are driving housing demand down precipitously,” Khater said. Consumer prices surged 8.2% in the 12 months through September.
In other bad housing news, existing-home sales slid for the seventh straight month in August—down 0.4% from July and 19.9% from a year ago, according to the National Association of Realtors (NAR).
The median existing-home-sale price dropped for the second month in a row – to $389,500 in August, down 3.5% from $403,800 in July. The price hit a record peak of $413,800 in June. To be sure, the August price was up 7.7% from a year earlier.
Sensitivity to the Fed
"The housing sector is the most sensitive to and experiences the most immediate impacts from the Federal Reserve's interest rate policy changes," said NAR Chief Economist Lawrence Yun. "The softness in home sales reflects this year's escalating mortgage rates.”
The Fed has raised rates by 3 percentage points since March, and experts expect it go another 75 basis points next month.
High mortgage rates are keeping both buyers and sellers on the sidelines, according to real estate brokerage Redfin.
Buyers are reluctant because they can’t afford elevated home prices and high mortgage rates.
“Sellers, hesitant to list their homes into an environment with diminished demand, are also motivated to stay put, because they don’t want to give up their own relatively low mortgage rates,” Redfin said.
Stay the Course
If you’re a prospective home buyer, you too might want to stay on the sidelines until mortgage rates retreat and home prices fall to reasonable levels. Of course, that may take a year or more. So you either have to be patient or pay up.
If you decide to rent, you may benefit from a recent decline in prices. The median asking rent in the top 50 cities dipped 0.7%, or $12, to $1,759 in September from August, according to Realtor.com. That follows a 0.6% decline in August, the first dip since last November.
To be sure, rents still rose 7.8% in the 12 months through September. But that was the lowest rate in 16 months.
