Interest rates for home loans have reached their peak since 2000, as indicated by Freddie Mac's primary mortgage market survey. As of Thursday, the average rate for a 30-year fixed-rate mortgage was reported at 7.49%, a significant rise from the previous week's rate of 7.31% and notably higher than last year’s average of 6.66%.
Sam Khater, Freddie Mac's Chief Economist, attributes this increase to inflation shifts, job market changes, and uncertainties about the Federal Reserve's actions impacting homebuyer demand. The 15-year fixed-rate mortgage also witnessed an increase to 6.78%.
In the face of these high rates, adjustable-rate mortgages are witnessing increased popularity due to their lower initial rates and the expectation of future refinancing. This trend comes as homebuyers adjust to the high-rate environment, which is predicted to persist until the end of 2024 according to Bright MLS Chief Economist Dr. Lisa Sturtevant.
Sturtevant also noted the impact of the rising 10-year Treasury yield, which could push mortgage rates to 8%, turning the housing market into a "market of necessity." With transactions potentially falling to 2010 levels due to high rates and low inventory, homebuilders are resorting to buying down interest rates and sellers are offering concessions to attract buyers.
The record interest rates have led to dwindling homebuyer demand and are expected to continue impacting the housing market in the foreseeable future.
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