Mortgage rates surged to a 23-year high this week. The rate on the average 30-year fixed mortgage increased to 7.31% from 7.19% the week prior, according to Freddie Mac. That’s the highest rate since mid-December 2000, when it averaged 7.42%.
TThe higher rates have hit homebuyers hard in two ways. First, moree expensive mortgages come at a time when housing pries are near highs too. So buyers are looking at being able to afford less house at a time when houses are selling for more. Second, the higher rates have discouraged potential sellers. If you’ve got a 5% mortgage on your house, you certainly have second thoughts about selling and having to take out a 7% mortgage That has reduced the supply of houses on the market. The drop in potential buyers has increased inventory but supply is still running 10% of so lower than in comparable weeks last year.
The volume of purchase applications for a mortgage fell 2% from one week earlier on a seasonally adjusted basis, the Mortgage Bankers Association (MBA) survey found for the week ending September. 22 found. Purchase demand was 27% lower than the same week a year ago
New home sales faltered in August. Pending home sales—-an indicator of future closed sales-—slumped during the month, while closed sales of previously owned homes dropped to a seven-month low. The median price of a resale home sold in August was $407,100, the highest for the month of August and the fourth highest ever, according to the National Association of Realtors. Overall, home prices hit a new record in July after climbing month over month for six straight months.
And economists are warning that 8% mortgages could be on their way.
None of this is good for the economy. A slow housing market is a drag on growth. And since inflation statistics use home prices as a way to calculate housing costs, more expensive homes are equal to higher inflation readings.
