Mortgage rates rise to 20-year high, leading to sharp decline in home sales

    0
    17

    The numbers: Mortgage rates have risen to their highest level in 20 years.

    The 30-year fixed-rate mortgage averaged 6.94% on Oct. 20, according to data released Thursday by Freddie Mac.

    That is the highest since April 2002.

    Rates are up 2 basis points from the previous week – one basis point is equal to one-hundredth of a percentage point, or 1% of 1%.

    Last week the 30-year was at 6.92%. Last year the 30-year average was 3.09%

    It’s worth noting that Mortgage News Daily, which tracks the daily movement in mortgage rates, notes that the 30-year is 7.22%.

    The average interest rate on the 15-year mortgage rose to 6.23%.

    “Mortgage rates slowed their upward trajectory this week,” said Sam Khater, chief economist at Freddie Mac FMCC,
    -1.75%,
    said in a statement.

    “The 30-year fixed-rate mortgage remains close to 7% and is negatively impacting the housing market in the form of declining demand,” he added.

    ‘The 30-year fixed-rate mortgage remains just below 7% and has a negative effect on the housing market in the form of declining demand.’


    — Sam Khater, chief economist at Freddie Mac

    Existing home sales, for example, continue to fall for the eighth straight month, the National Association of Realtors said Thursday. They fell 1.5% in September to a seasonally adjusted annual figure of 4.71 million. The last time they fell to this level was May 2020.

    In addition, the number of homes sold last month fell 25% year-on-year and the number of new homes decreased by 22%, Redfin RDFN,
    +2.29%
    said Wednesday. Those were the largest declines on record, excluding the early months of the pandemic, Redfin said.

    “The US housing market has come to a standstill again, but the driving forces are completely different from those that brought it to a halt at the start of the pandemic,” Chen Zhao, Redfin’s chief of economics research, said in a statement.

    “In addition, homebuilder confidence has fallen to half of what it was just six.”
    months ago and construction, especially single-family housing,
    continues to slow,” Khater added.

    The adjustable-rate mortgage averaged 5.71%, down from the previous week.

    Deterred by high rates, buyer fears have pushed mortgage applications to their lowest since 1997, according to the Mortgage Bankers Association.

    The return on the 10-year Treasury TMUBMUSD10Y,
    4.150%
    rose above 4.17% in morning trading on Thursday, suggesting yields are likely to rise further.

    Diane Swonk, chief economist at KPMG US wrote on Twitter TWTR:
    -4.86%
    : “The path ahead is difficult and what I have called the canary in the coal mine, housing, seems to be sending an ominous signal about where we are and where we are going. Difficult.”

    (Bill Peters contributed to this report.)

    Do you have ideas about the housing market? Write to MarketWatch reporter Aarthi Swaminathan at: [email protected]

    .

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here