Another Week Of Rate Increases

Mortgage rates inched up to an average 5.30% last week, Freddie Mac reported Thursday.

Freddie’s Primary Mortgage Market Survey (PMMS) found that the 30-year fixed-rate mortgage (FRM) averaged 5.30%. A year ago at this time, the 30-year FRM averaged 2.96%.

“Homebuyers continue to show resilience even though rising mortgage rates are causing monthly payments to increase by about one-third as compared to a year ago,” said Sam Khater, Freddie Mac’s Chief Economist.

“Several factors are contributing to this dynamic, including the large wave of first-time homebuyers looking to realize the dream of homeownership. In the months ahead, we expect monetary policy and inflation to discourage many consumers, weakening purchase demand and decelerating home price growth.”

Affordability dropped in Q1 2022, with monthly mortgage payments on the typical home rising to $1,383 (+30% YOY). Homeowners spent 18.7% of their income on mortgage payments, according to NAR.

The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index found that only 56.9% of new and existing homes sold between the beginning of January and the end of March were affordable to families earning the U.S. median income of $90,000. 

NAHB warned that affordability will only worsen from here.

“Looking at current market conditions, affordability woes continue to mount as rising interest rates and home building material costs that are up 20% year-over-year are causing housing costs to rise much faster than wages,” said NAHB Chief Economist Robert Dietz. 

“The HOI falling below 50 using these real-time estimates is an indication of significant housing affordability burdens, particularly for frustrated, prospective first-time buyers. The best way to ease growing affordability challenges is for policymakers to address ongoing supply chain disruptions that will allow builders to construct more affordable homes.”

Additional findings from Thursday’s report:

  • 15-year fixed-rate mortgage averaged 4.48% with an average 0.9 point.
  • A year ago at this time, the 15-year FRM averaged 2.26%.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.98% with an average 0.3 point.
  • A year ago at this time, the 5-year ARM averaged 2.59%