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As interest rates climb, mortgage demand falls to its lowest level in a month
Mortgage rates reached their highest point since May, leading to a decline in mortgage demand. Mortgage applications decreased by 4.4% compared to the previous week, marking the lowest level in a month. The average interest rate for 30-year fixed-rate mortgages rose to 6.85%, with points increasing to 0.65. Another survey indicated that rates surpassed 7% last Thursday and have remained above that level since then. As a result, home purchase demand dropped by 5% for the week and was 22% lower than the same period last year. However, the average loan size for purchase applications decreased to $423,500, the lowest since January 2023. This decline in loan size was likely due to reduced homebuying in high-price markets and increased activity in lower price tiers. Refinance applications also fell by 4% for the week and were 30% lower than a year ago. The upcoming release of employment data may impact mortgage rates, potentially influencing the Federal Reserve's decision to implement further rate hikes.
Mortgage rates increase to 7.22% following positive economic data
The average rate for a 30-year fixed mortgage reached 7.22%, the highest since November. This increase was influenced by the yield on the 10-year Treasury, which rose after a strong employment report. Federal Reserve Chairman Jerome Powell's remarks about potential interest rate hikes also contributed to the rise. Mortgage rates have gone up by 31 basis points in just one week, resulting in higher monthly payments for homebuyers. The current high mortgage rates have discouraged homeowners from selling, as they don't want to give up their low-rate mortgages. Consequently, there is now a shortage of homes for sale, with new listings 20% behind last year's pace.
Home prices are rising once more as a result of tight availability caused by high interest rates
Home prices reached a new record high in May, increasing by 0.7% compared to April. Although there was a slight decline of 0.1% from the previous year, home prices have been consistently rising since January. The housing market has regained momentum, with a notable month-over-month gain of 0.7%, suggesting a potential annualized growth rate of 8.9%. The market experienced a dip in prices last summer due to a surge in mortgage interest rates, but buyer demand has since returned. Despite higher mortgage rates, people are accepting them as the new norm. Many housing markets, particularly in the Midwest and Northeast, have surpassed their pre-pandemic price peaks. However, some regions in the West and pandemic "boom towns" are still experiencing weaker prices, although they are starting to stabilize. Supply is decreasing, with new listings down 25% from the previous year, causing bidding wars and impacting affordability. The median price for pre-owned homes in May was $396,100, and mortgage payments for median-priced homes reached a record high.
