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Mortgage rates reach 23-year high, impacting US housing market

Published Sep 28, 2023 05:37PM ET
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The U.S. housing market is navigating challenging waters as mortgage rates have risen to their highest level in nearly 23 years. On Thursday, Freddie Mac's latest Primary Mortgage Market Survey revealed that the average rate for a 30-year fixed mortgage climbed to 7.31%, up from 7.19% the previous week and significantly higher than the 6.7% average a year ago.

The rate for a 15-year mortgage also rose, averaging at 6.72%, up from last week's 6.54%, and noticeably higher than the 5.96% average from a year ago. This surge in mortgage rates represents the highest levels recorded since the year 2000.

Sam Khater, Freddie Mac’s chief economist, noted that unlike the turn of the millennium, current house prices are rising alongside mortgage rates due to low inventory. This situation is causing both buyers and sellers to wait for improved conditions.

Data from the National Association of Realtors further illustrated this trend, showing a 7.1% drop in pending home sales in the U.S. last month. The high housing costs are evidently causing more consumers to hesitate before finalizing a deal.

The median monthly mortgage payment recently reached an all-time high of $2,632, pricing out many potential buyers or causing sticker shock. Concurrently, potential sellers who secured their homes at much lower mortgage rates are choosing to stay put, further exacerbating the ongoing inventory shortage which has been driving up home prices since the onset of the pandemic.

Despite this, Freddie Mac, with a market cap of 1940M USD, is expected to grow its net income this year according to InvestingPro Tips. The company's strong return over the last three months, with a 41.77% increase, is a testament to its resilience amidst these challenging times. Additionally, the company's liquid assets exceed its short-term obligations, providing it with a decent financial buffer.

The Federal Reserve's aggressive tightening campaign has led to a rapid cooling in the interest rate-sensitive housing market. Policymakers have increased the benchmark federal funds rate 11 times in an effort to curb stubborn inflation and slow down the economy.

During their policy-setting meeting last week, officials indicated that another rate hike could be expected this year, suggesting that rates are likely to remain high for some time.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Mortgage rates reach 23-year high, impacting US housing market

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