Mortgage rates edge higher this week

·Personal finance writer
·4 min read

Mortgage rates edged higher this week, pushing purchase and refinance mortgage activity to a 22-year low.

The rate on the 30-year fixed mortgage increased to 5.54% from 5.51% the week prior, according to Freddie Mac. While lower than the 5.81% registered in late June, the average rate is still more than 2 percentage points higher than the beginning of the year.

Higher rates have stomped on homebuyers’ resolve, with many already contending with challenging affordability conditions and newfound recession worries. Homeowners, too, are growing more conservative, as elevated borrowing costs and inflation have made tapping into equity more expensive.

“The housing market remains sluggish as mortgage rates inch up for a second consecutive week,” Sam Khater, Freddie Mac’s chief economist, said in a press statement. “Consumer concerns about rising rates, inflation and a potential recession are manifesting in softening demand.”

“As a result of these factors, we expect house price appreciation to moderate noticeably,” he said.

The slight rate jump on the popular 30-year home loan followed an uptick in the 10-year Treasury yield this week, as recession fears continue to loom. Those worries have also bled into the slowing housing market.

A record 81% of consumers think the economy is on the “wrong track,” according to the latest homebuyer sentiment survey from Fannie Mae. For the first time in seven years, a majority of respondents said it would be difficult to get a mortgage.

At the same time, mortgage applications declined for the third straight week, according to the Mortgage Bankers Association’s survey for the week ending July 15. Applications slid 6.3% from one week earlier, hitting its lowest level since 2000.

Existing home sales, too, fell for the fifth straight month in June, at a pace of 5.12 million, down 5.4% from May and 14.2% from one year ago.

“For a lot of people – especially homebuyers – there’s a big question beginning to emerge in this year’s markets and their decision-making everyday, which is: ‘Is my job secure six months from now, a year from now?’” George Ratiu, manager of economic research at Realtor.com, told Yahoo Money. “Today’s market is not what it was a few months ago.”

A sign is posted in front of a home for sale on July 14, 2022 in Corte Madera, California. The number of homes for sale in the U.S. increased by 2 percent in June for the first time since 2019. High interest rates coupled with a faltering economy and surging home prices have kept many homebuyers out of the market. (Photo by Justin Sullivan/Getty Images)
A sign is posted in front of a home for sale on July 14, 2022 in Corte Madera, California. The number of homes for sale in the U.S. increased by 2% n June for the first time since 2019. High interest rates coupled with a faltering economy and surging home prices have kept many homebuyers out of the market. (Credit: Justin Sullivan, Getty Images)

But the slowdown in buyer demand has yet to translate into lower prices.

The average asking price of for-sale homes hit a new high of $450,000 in June, according to Realtor.com’s latest Housing Trends report. Though the share of listings that registered a price cut was nearly double the amount documented a year ago, double-digit home price growth has made homeownership out of reach for many first-time buyers.

At today’s rate, the monthly mortgage payment for a median-priced home is $2,100, a 59% jump from a year ago. According to Realtor.com, a household earning $75,000 per year can only afford 23% of active listings.

“First time buyers are very frustrated,” Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors, told Yahoo Money.

Only about 8% of Broward households can afford a single-family home at the median sale price. Experts worry how that might affect the area's service and hospitality workforces -- major pillars of the local economy. (Credit: Mike Stocker, Sun Sentinel, Tribune News Service via Getty Images)
Only about 8% of Broward households can afford a single-family home at the median sale price. Experts worry how that might affect the area's service and hospitality workforces -- major pillars of the local economy. (Credit: Mike Stocker, Sun Sentinel, Tribune News Service via Getty Images)

Still, the inventory of unsold existing homes rose to 1.26 million by the end of June, according to NAR. That’s equivalent to three months of inventory at the current monthly sales pace, a hopeful nod to better conditions for first-time buyers down the line. Six months is considered a balanced market.

“One silver lining for buyers is that this pace of growth marks a slowdown,” Danielle Hale, chief economist for Realtor.com, said in a press statement, “and more is expected as additional for-sale inventory helps tip the market to a more balanced place.”

Claudia Teyssandier, Zillow Offers Renovation Estimator, and J Myers, Zillow Offers National Renovation Manager, evaluate a home for a possible purchase in Lauderhill, Florida. (Credit: Joe Raedle,Getty Images)
Claudia Teyssandier, Zillow Offers Renovation Estimator, and J Myers, Zillow Offers National Renovation Manager, evaluate a home for a possible purchase in Lauderhill, Florida. (Credit: Joe Raedle,Getty Images)

Higher borrowing costs are also hurting homeowners.

With rates more than 2 percentage points higher than the start of the year, few homeowners are interested in refinancing. According to MBA data, refinance activity is 80% lower than the same week a year ago.

“People are not going to find the same loan terms with refinancing that they once did,” Evangelou said. “We don’t have a 3% rate anymore, they are nearly 6% and increasing.”

Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.

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