Homes in Rocklin, California, on Tuesday, December 6, 2022.
David Paul Morris | Bloomberg | Getty Images
The average interest rate on a 30-year fixed mortgage was more than 7% on April 1, according to Mortgage News Daily, and has continued to do so. It is now around 7.5%, the highest level since mid-November last year.
Interest rates reached their highest level in a few decades last October, causing home sales to stall. Builders jumped in to buy low prices for their clients and were able to do better than existing home sellers.
Prices then dropped during mid-January to the mid-6% range and remained at that level through February, causing home sales to surge. But then they started to rise again.
“By mid-February, rising inflation had reset expectations, putting mortgage interest rates back on the upward trend, and the latest data and comments from Fed Chairman (Jerome) Powell have only served to highlight the situation,” said Danielle Hale, chief economist. Inflation fears. For Realtor.com. “Sales data over the next few months will likely reflect the impact of higher mortgage rates now.”
However, even with rates rising, home mortgage applications rose 5% last week compared to the week before, according to the Mortgage Bankers Association's seasonally adjusted index. Demand was still 10% lower than it was in the same week one year ago, even with interest rates now 70 basis points higher than a year ago.
“Despite these higher rates, application activity has picked up, perhaps because some borrowers have decided to act if rates continue to rise,” said Joel Kahn, chief economist at MBA.
However, this may be short-lived, as affordability weakens further. Although supply on the market is now greater than it was a year ago, it is still at a historically very low level. This has resulted in homes moving faster as competition increases. Anyone waiting for interest rates to fall significantly may be waiting a while.
“Recent economic data shows that the economy and labor market remain strong, which is likely to keep mortgage rates at these high levels for the foreseeable future,” said Bob Broeksmidt, MBA President and CEO.
