Mortgage rates continue to rise, throwing a bucket of cold water at lenders and consumers who were eager to lower borrowing costs just a few months ago.
The average 30-year conformity rate was 6.61% as of Tuesday, according to HousingWire’s Mortgage Rate Center. This is up 15 basis points (bp) from a week ago and 30 basis points higher than on September 18, when the US Federal Reserve (Fed) cut its benchmark interest rate by 50 basis points.
Since the Fed’s decision, the 2015 compliance rate has risen even more sharply, rising from 5.7% on Sept. 18 to 6.15% on Tuesday.
Rising mortgage rates don’t necessarily prevent sellers from listing their homes, according to data from Altos Research. Sales inventory of single-family homes increased by 33% compared to the previous year. New pending sales are also on the rise, with the 60,000 units for which contracts began last week an increase of 9% compared to the same week last year and an increase of 11% compared to the same week in 2022.
“We are very slowly adjusting to the new normal of rising mortgage rates,” said Mike Simonsen, founder and president of Altos Research. “Last month’s drop in mortgage rates led to an increase in pending sales, but that mortgage profit is now gone. This progress is sufficient to indicate a year-over-year increase. And it may be temporary.”
Last week, with the release of September construction statistics from the U.S. Census Bureau, HousingWire principal analyst Logan Mortashami said home builders are having the same worries as consumers about borrowing costs. I wrote. The Fed’s policy rate range of 4.75% to 5% is lower than it has been in the past year, but lower than what many market participants consider the neutral rate needed to stimulate borrower demand. Still quite high.
“Housing permits for five-family homes are at recession levels. Anyone who thinks we are on the brink of a housing boom is kidding when policies are still this restrictive,” Mortashami wrote. .
“…we expected the number of permits for single-family homes to increase further, as the recent rise in mortgage rates should not have been fully felt here yet.However, with mortgage rates above 6.75%, We know that builders are less enthusiastic about issuing many single-family permits because of the
Recently released data from Zillow shows housing starts in 2023 are down for the second year in a row, but activity remains above pre-pandemic levels. The real estate giant reported that builders are pivoting to condos and townhomes in an effort to increase the supply of starter homes at lower prices.
Zillow reports that single-family home starts decreased by 8.9% in 2023, while attached property starts increased by 3.2% and condominium starts increased by 8.1%. A similar trend was evident in the number of completed homes, with the number of single-family homes decreasing by 5.1%, but the number of attached homes increasing by 9.6%.
Some regions of the country appear poised to see significant increases in supply in the near future. According to Zillow, the number of single-family home permits increased in most major metropolitan areas from January to August compared to the same period last year. Permits jumped more than 25% in Indianapolis, Phoenix, San Diego, San Antonio and Milwaukee.
Rising home prices, along with rising mortgage rates, continue to hinder affordable home purchases. Redfin reported Tuesday that prices rose a seasonally adjusted 0.5% from August to September. This was the highest monthly growth rate since April. On an annual basis, prices rose 6%.
Mortgage affordability improved in September when interest rates fell to 6.08%, but home prices continue to rise as demand outstrips supply.
“There are about 20% fewer homes on the market today than there were five years ago,” Sheharyar Bokhari, senior economist at Redfin, said in the report. “This is because many homeowners have been locked into low mortgage rates.” “With mortgage rates again above 6.5% this month and unlikely to fall below 6% this year, home prices are likely to continue rising consistently until more inventory hits the market in the spring. .”
