The average interest rate on a 30-year mortgage has now exceeded 5%, the highest point in more than a decade. The sudden rise in mortgage interest has diminished and some experts predict that home sales could slow this year as some buyers leave the market.
Interest rates rose to 5.08% on April 6, according in the Mortgage News Daily, although the Bank Mortgage Association reported average interest rates as slightly lower, at 4.90%. It is over marking an increase of about two percentage points from last year.
The average mortgage rate has not exceeded 5% since January 2010, according to Freddie Mac data.
Each percentage point increase addsin monthly payments for buyers of average price homes . Higher prices are pricing millions of off-market buyers, while also making it less attractive for current homeowners to refinance their properties. Mortgage applications fell more than 6% for the week ended April 1, according to the Mortgage Bankers Association.
Homebuyers have been hit “one or two times” by rising house prices and rising mortgage rates this year, Jeff Tucker, Zillow’s senior economist, told CBS MoneyWatch.
“Which means that every particular house you buy will be more expensive to pay on a monthly basis,” Tucker said. “For some people, that means looking at a smaller house in a different neighborhood or a mansion instead of a detached house.”
Rising interest rates also mean that home buyers may want to change their buying strategy, said Redfin chief economist Daryl Fairweather.
“If you are looking for a home right now, you need to be extremely balanced with your budget and be careful not to make overly high bids for newly registered homes,” Fairweather told CBS MoneyWatch. “You should also take a look at homes that have been on the market for more than a week or those that have recently had a drop in price, as you may be able to avoid some of the fiercest competition and make a reasonable offer. “
Not All homebuyers are afraid of higher interest rates, said Matthew Pointon, senior economist at Capital Economics. “Mortgage applications continue to flood in some parts of the country” because some households are trying to buy now before interest rates rise further, “Pointon said in a survey. Note Wednesday.
Pandemic housing bubble?
During the pandemic, mortgage rates fell to historic lows, in part as the Federal Reserve kept interest rates close to zero and the federal government channeled trillions into the economy through stimulus programs. These extremely low mortgage rates – which fell as much as 2.65% in January 2021 – pushed millions of consumers to jump into the real estate market.
With strong demand, sellers demanded more for their properties, leading to double-digit annual price increases across the country. In February, house prices rose 20% year-on-year, according to data released on Wednesday by CoreLogic.
The rapid rise in house prices duringhas pushed it beyond the means of many middle-class Americans, who are increasingly bidding against higher-income investors and buyers for a shrinking pool of housing. Between the cities are Atlanta, Charlotte, NC, Phoenix, Miami, Florida and San Diego.
These rapidly rising housing prices have raised concerns about the housing market, with the Dallas Federal Reserve recentlythat the real estate market is showing “signs of a real estate bubble in the US”.
With the inflation at a high of 40 years, the US Federal Reserve recently startedin 2022 – and mortgage rates are rising with them.
Rising interest rates are forcing some Americans to reconsider their plans to buy a home. The decline in mortgage applications last week was mainly due to a “rapid rise in mortgage rates,” the Bank Mortgage Association said.
There are indications that rising mortgage rates are starting to affect the real estate market in other ways, with Redfin predicting that house price growth will slow. More sellers reduce their asking prices after listing on the stock exchange, the real estate company he said Last week.
There is no guarantee that interest rates will jump again, but the US Federal Reserve has signaled that it plans to raise its short-term lending rate a few more times this year. Mortgage lenders often raise interest rates in conjunction with the Fed.