Mortgage rates hit their highest level in more than 20 years last week, breaking 7% on average and adding extra weight to Americans’ heavy housing burden.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 7.09%, up from 6.96%. A year ago at this time, the 30-year FRM averaged 5.13%.
The 15-year fixed-rate mortgage also increased, up to 6.46% from 6.34%. A year ago, it averaged 4.55%.
“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s Chief Economist.
These are the highest rates since April of 2002. In October and November of last year, rates reached 7.08%.
“The last time the 30-year fixed-rate mortgage exceeded seven percent was last November. Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales,” Khater said.
As existing inventory remains low, new homes are gaining an ever-increasing market share. But builders are feeling the sting of high rates, too. At the end of last year, builders slowed production as demand dwindled, sparking concern that a surge of buyers could throw the market further out of whack.
Housing starts jumped in July but stagnant building permit data suggests another slowdown may be on the horizon.
The impact of high rates and low inventory extends beyond homeownership itself.
A prime example is the national teacher shortage, which is exacerbated by the shortage of affordable homes.
The average metro teacher can afford just 12% of homes for sale within commuting distance of their school and 27% of available rentals in the same area.
“Many teachers who can’t afford to buy a house near work are either renting and missing out on the opportunity to build wealth through home equity or leaving education in search of more lucrative careers,” Redfin Senior Economist Sheharyar Bokhari said.
Employers across the country — from vacation hotspots like Summit County, CO, to lumber towns in Michigan — are facing a similar dilemma.
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