Mortgage Rates on the Rise, Reaching 7 Percent

November 24, 2024 TruthUSA

Housing production decelerated last month amid higher rates.

Mortgage rates are approaching the 7 percent mark after dipping to nearly 6 percent a few weeks ago, posing additional challenges for the American housing market.

The average rate on a 30-year fixed mortgage was 6.84 percent for the week ending Nov. 21, based on Freddie Mac’s data. This rate has risen from a low of 6.08 percent in late September and is now nearing the peak of 7.22 percent reached in May this year.

“As we head into the holiday season, demand for home purchases remains weak,” stated Sam Khater, the chief economist at Freddie Mac. “Although the inventory for sale is slightly increasing, the high interest rate environment has caused a slowdown in new construction.”

Mark Palim, the senior vice president and chief economist at Fannie Mae, observed that interest rates have risen over the past few months due to “continued strong economic indicators and disappointing inflation data.”

The surging mortgage rates are likely to maintain the ongoing “lock-in effect,” with homeowners hesitant to sell as they have lower existing mortgage rates. Selling now would mean acquiring new properties at higher rates.

An August report by Redfin revealed that nearly 86 percent of homeowners have mortgage rates below 6 percent. Around 60 percent have rates below 4 percent, while over 20 percent have rates lower than 3 percent.

Forecasters anticipate that the elevated mortgage rates will keep inventory growth and existing home sales “muted” throughout the upcoming year, Palim mentioned.

Fannie Mae’s Economic and Strategic Research team initially projected mortgage rates to drop below 6 percent early next year. However, they have revised their forecast and now anticipate rates to hit 6.3 percent by the end of next year.

Realtor, a real estate listings website, reports that the housing market is adapting to the forthcoming policies of President-elect Donald Trump, who vows to tackle illegal immigration and increase tariffs on imports.

Temporary Demand Surge

Despite the rising mortgage rates, early-stage homebuying activity is at its highest level in 15 months, according to Redfin. The recent surge in buyers and sellers is a post-election trend, according to Chen Zhao, the economic research lead at the company.

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