The average interest rates closed in on the 7% mark last week, pushing affordability further out of reach for many Americans.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.96%, up from 6.81% the week prior in the second week of 10+ bps jumps.
A year ago at this time, the 30-year FRM averaged 5.51%.
The 15-year fixed-rate mortgage shot up as well, from 6.24% to 6.30%. A year ago, it averaged 4.67%.
“Incoming data suggest that inflation is softening, falling to its lowest annual rate in more than two years. However, increases in housing costs, which account for a large share of inflation, remain stubbornly high, mainly due to low inventory relative to demand,” said Sam Khater, Freddie Mac’s Chief Economist.
Redfin recently reported that homebuyers have lost incredible purchase power as rates rose.
A homebuyer on a $3,000 monthly budget can now afford a $450,000 home, down $30,000 from February when they could buy a house with a 6% interest rate. That same buyer could have bought a $510,000 home last year.
The stark differences in buying power have a huge impact on the current market. Home prices climbed 1.4% just from May to June as demand continues to outstrip inventory.
Inflation slipped to an increase of 3% YOY last month, which could translate to retreating rates later this year. But major declines won’t come fast.
“This month’s inflation report is likely to bring mortgage rates down a bit from their recent highs,” said Redfin Economic Research Lead Chen Zhao. “But even though rates will come down slightly, they’ll likely remain well above 6% until the Fed sees several more months of inflation readings closer to their target.”
With so many Americans locked into sub-4% rates, tempting them to sell will take a serious drop in rates we likely won’t see right away.
Still, inflation data has already made an impact. Daily rates have eased into the high-6%s this week, data excluded from Freddie Mac’s averages.