Mortgage rates remain over 7%, continuing February’s trend
Homebuying demand slides as higher rates and tight supply continue to hammer affordability.
Mortgage rates have hovered above 7% every day for the last two weeks.
The average rate for a 30-year mortgage reached 7.16% on two separate days over the last week and settled at 7.1% on Thursday, according to Mortgage News Daily tracking. The latest average is the highest since November.
A different index following the weekly average 30-year loan rate showed mortgages increased to 6.94% from 6.90% a week prior, according to Freddie Mac. Rates rose for the fourth consecutive week based on this weekly tracking.
Loan averages have been gradually increasing alongside higher-than-expected inflation. Those factors, combined with elevated home prices and low inventory, have kept many buyers on the sideline.
“Mortgage rates continued their ascent this week, reaching a two-month high and flirting with 7% yet again,” Sam Khater, Freddie Mac’s chief economist, said. “The recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for homebuying.”
Read more: Mortgage rates hover around 7% — is this a good time to buy a house?
Higher prices and lower demand
The volume of mortgage application activity dipped for the third consecutive week. Mortgage applications decreased almost 6%, according to the Mortgage Bankers Association (MBA).
Refinance activity declined 7%, and purchase activity dropped 5% week-over-week. Both trackers dipped on a year-over-year basis, with refinancing retreating 1% and purchases decreasing 12%.
“Higher rates in recent weeks have stalled activity, and last week it dropped more for those seeking FHA and VA refinances,” Mike Fratantoni, MBA’s chief economist, said.
It all contributes to a squeeze on affordability. In January, the national median mortgage payment increased to $2,134 from $2,055 in December, according to MBA. The national median mortgage payment increased by $170 a month compared to a year ago, pushing costs up by more than 8% for homebuyers. Meanwhile, home prices jumped 5.5% in December from a year earlier, according to the S&P CoreLogic Case Shiller National Home Price Index.
Solid housing price gains in 2023, amid high mortgage rates, have created an unbalanced market where demand continues to overtake supply even as affordability worsens.
“Housing supply and demand are in a very weird spot,” Bill Adams, chief economist for Comerica Bank, said. “Supply is constrained by homeowners who locked in low mortgage rates and tax assessments years ago, who might sell in a normal market but are sitting on the sidelines in this one. Demand is constrained by high mortgage rates, as well as high prices contributing to an overall tough picture for homebuying affordability.”
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
Read the latest financial and business news from Yahoo Finance