Recent developments haven’t been good on the mortgage front.
First came the news that mortgage applications fell 5% in the week ended April 15 from a week earlier, according to the Mortgage Bankers Association.
And now comes the news that the average rate for 30-year fixed mortgages rose to 5.11% in the week ended April 21, the highest level in 11 years.
The latest rate was up from 5% a week earlier and 2.97% a year ago.
“Mortgage rates increased for the seventh consecutive week, as Treasury yields continued to rise,” Sam Khater, Freddie Mac’s Chief Economist, said in a statement.
“While springtime is typically the busiest homebuying season, the upswing in rates has caused some volatility in demand.
“It continues to be a seller’s market, but buyers who remain interested in purchasing a home may find that competition has moderately softened.”
Rising Treasury YieldAmong Treasury securities, the 10-year yield climbed 0.18 percentage point to 2.85% in the week ended April 21. And many economists and investors expect the Federal Reserve to raise interest rates by 0.5 percentage point at each of its next two meetings.
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“In a housing market facing affordability challenges and low inventory, higher rates are causing a pullback or delay in home purchase demand as well,” Mortgage Bankers Association economist Joel Kan had said in a statement.
“Home-purchase activity has been volatile in recent weeks and has yet to see the typical pickup for this time of the year.” His comments proved prescient.
A few days afterward, the National Association of Realtors reported that existing-home sales fell 2.7% in March from February, leaving them down 4.5% from a year earlier.
Soaring home prices also damped buying, as existing-home-sale prices jumped 15% in March from a year earlier to $375,000. That’s the highest level since the NAR began tracking the data in 1999.
Pricey CitiesAmong cities, the highest March price increases came in Miami-Fort Lauderdale-West Palm Beach, Fla., (37% year-on-year), Las Vegas-Henderson-Paradise, Nevada, (35%) and Tampa-St. Petersburg-Clearwater, Fla. (up 32%).
“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” Lawrence Yun, NAR’s chief economist, said in a statement.
“Still, homes are selling rapidly, and home-price gains remain in the double digits.”
Given expectations for a continued climb in mortgage rates, Yun expects existing-home sales to drop 10% this year.
One silver lining in the clouds: Yun sees home-price appreciation easing to about 5% this year.