Rates Shoot Up To 7.17%

Average mortgage rates increased again last week, worsening affordability and setting the market up for a slump as the spring buying season progresses.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 7.17%, jumping from the week prior’s 7.1%. A year ago at this time, the 30-year FRM averaged 6.43%.

The 15-year fixed rate increased from 6.39% to 6.44%. A year ago, it averaged 5.71%. 

“Despite rates increasing more than half a percent since the first week of the year, purchase demand remains steady. With rates staying higher for longer, many homebuyers are adjusting, as evidenced by this week’s report that sales of newly built homes saw the biggest increase since December 2022,” said Sam Khater, Freddie Mac’s Chief Economist.

But experts at the National Association of Home Builders note that the increase came in March when rates were still under 7%.

NAHB Chairman Carl Harris cautioned that rising rates will “move some home buyers to the sidelines as the spring progresses” and force builders to double down on incentives to boost sales.

Purchase applications slipped last week as buyers digested soaring costs. Inflation remains a challenge as well, dispelling early-year optimism that the Central Bank could make cuts in 2024 and help rates cool.

The personal consumption expenditures price index excluding food and energy increased 2.8% YOY, slightly more than expected. This is a key metric watched by the Fed.

“Inflation reports released this morning were not as hot as feared, but investors should not get overly anchored to the idea that inflation has been completely cured and the Fed will be cutting interest rates in the near-term,” George Mateyo, chief investment officer at Key Wealth, told CNBC.

Desperate buyers could still rally through the spring season. Some demand metrics like home tours are on the rise. The prevailing idea among a certain subset of buyers may be to move fast before rates and prices get any worse.

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