The current US mortgage rates have reached 7.49%, making homeownership even more unattainable for potential homebuyers. This increase in rates from the previous week’s 7.31% is due to factors such as inflation, the job market, and uncertainty surrounding the Federal Reserve’s future actions. Sam Khater, Freddie Mac’s chief economist, attributes the high mortgage rates to these factors, which have consequently decreased homebuyer demand. The housing market has been impacted significantly, with home affordability reaching its lowest level in decades and home sales falling by more than 20% compared to the previous year.
The Federal Reserve’s efforts to curb inflation have caused mortgage rates to surge. With the central bank indicating the possibility of keeping rates higher for an extended period, the 10-year Treasury yield, a key benchmark for mortgage rates, has also increased. This added cost of mortgage financing, combined with rising home prices due to limited inventory, has worsened home affordability. As a result, the housing market has seen a decline in buyer activity, with purchase applications reaching their lowest level since 1995. However, there is hope that the 30-year fixed-rate mortgage will decrease by the end of the year, providing some relief for prospective homebuyers in 2024.
The current high mortgage rates have discouraged homebuyers from entering the market, and homeowners are equally reluctant to put their homes up for sale due to the limited supply. Over 90% of homeowners still have mortgage rates below 6%, and they are not interested in trading their low rates for higher ones. Home affordability continues to be a challenge, as rising prices and shorter days on the market indicate competition among buyers. The Fed’s influence on interest rates, coupled with the upcoming September jobs report, will play a vital role in determining the future path of mortgage rates. A strong jobs report may lead to further rate increases, while any signs of weakness could cause rates to tick down.
