Mortgage rates increased slightly last week, inching up after falling the week prior.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.81%, up from 6.78%. A year ago at this time, the 30-year FRM averaged 5.30%.
The 15-year fixed-rate mortgage also increased, up to 6.11% from 6.06%. A year ago, it averaged 4.58%.
“Higher interest rates continue to dampen activity in interest rate-sensitive sectors, such as housing. However, overall U.S. consumer confidence is unwavering, surging to a two-year high in the Conference Board’s Consumer Confidence Index for July 2023,” said Sam Khater, Freddie Mac’s Chief Economist.
“Rising consumer confidence often leads to greater spending, which could drive more consumers into the housing market.”
Consumers believe that the labor market is working out in their favor, with a high share of respondents saying that jobs are “plentiful” right now. Both low and high earners – those making under $50,000 a year and over $100,000 – said the future looks bright for business and job opportunities.
As affordability continues to worsen, many potential homebuyers have no choice but to seek out more earnings.
First-time buyers need to earn 13% more to afford a typical starter home than they did at the same time last year. In South Florida, that number is 20%.
Making matters worse, most first-time homebuyers won’t be able to buy a starter home anyway. New listings for these houses are down 23% YOY and aren’t likely to rise any time soon. Entry-level inventory is up only 1% from last year.
“Buyers shopping for the least-expensive homes this spring aren’t noticing much difference from the pandemic-era market heat,” Skylar Olsen, Zillow’s chief economist, noted of the trend.
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