The upward trend in mortgage rates continues to put pressure on home buyers as daily 30-year mortgage rates hit a significant milestone of 8% on Wednesday afternoon. This increase of 0.08 percentage points from the previous day’s rate was driven by rising yields on 10-year Treasury debt, which in turn affects mortgage rates. On Wednesday, the yield on the 10-year surpassed 4.9%.
Challenging Environment for Home Buyers
Prospective home buyers are facing a challenging environment characterized by low housing inventory, stable prices, and higher financing costs. With the recent surge in mortgage rates, the real estate market is anticipated to experience a decline in September home sales.
Freddie Mac Data Confirms the Trend
Freddie Mac, the leading mortgage provider, is scheduled to release its weekly mortgage rate data on Thursday. According to Freddie Mac, the last time this closely-monitored indicator reached 8% was in 2000.
Continuous Increase in Rates
Additional data from the Mortgage Bankers Association further supports the notion of rising mortgage rates. Last week, the average 30-year fixed rate on loans with conforming balances climbed to 7.70%, up from the previous week’s 7.67%. It is important to note that daily rates, such as those reported by Mortgage News Daily, are often higher than their weekly counterparts.
As the demand for housing persists and mortgage rates surge, home buyers must navigate these challenging conditions as they strive to secure their dream homes.
Mortgage Applications Decline Amid Higher Rates
The Mortgage Bankers Association (MBA) reported a 6% drop in loan applications for new home purchases in the week that ended on October 12th. This decrease was observed on a seasonally adjusted basis, according to the association’s Market Composite Index. The overall index for both purchasing and refinancing applications also fell 6.9%, marking the lowest reading since 1995.
MBA’s deputy chief economist, Joel Kan, stated that the decline in home buying activity is a result of reduced purchasing power caused by higher interest rates and the persisting lack of available housing inventory. These factors have deterred potential homeowners from entering the market.
Despite the decrease in loan applications, there was a notable recovery in housing starts during September. The Census Bureau data revealed a 7% increase in new-home construction, reaching a seasonally adjusted annual rate of 1.358 million. This growth can be attributed to the rise in multifamily projects.
However, despite the positive housing-start figures, the SPDR S&P Homebuilders exchange-traded fund (ticker: XHB) experienced a decline of 2.6% on Wednesday. Similarly, the iShares U.S. Home Construction ETF (ITB) also decreased by 2.1%.
Overall, the combination of higher interest rates, limited housing inventory, and fluctuating market conditions continues to impact the real estate sector.