Mortgage rates reach their 2023 peak | SkipLeadPro
Mortgage rates jumped this week as investors grapple with persistent positive economic data and a hawkish Fed.
The Freddie Mac’s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 6.81% as of July 6, up significantly from last week’s 6.71%. By contrast, the 30-year was at 5.30% a year ago at this time.
Other mortgage indexes also show rates rising.
The 30-year fixed rate for conventional loans was 7.08% at Mortgage News Daily on Thursday morning, up 17 basis points from the previous week. HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 6.92% on Wednesday, compared to 6.69% the previous week.
“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” said Sam Khater, Freddie Mac’s chief economist in a statement. “This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve.”
High rates combined with low inventory continue to price many potential homebuyers out of the market, added Khater.
Markets are still digesting the Federal Reserve’s most recent FOMC meeting, during which Federal Reserve Chair Jerome Powell hinted at additional rate hikes before the end of the year. The 10-year Treasury yield was north of 4.0% on Thursday, a threshold not seen since March of this year.
Economic resilience is taking investors aback. Consumer spending keeps growing, as do auto sales, which were expected to soften. Real estate markets also speak to resilient conditions, as buyers have accepted mortgage rates in the new normal of 6% – 7% range and kept a steady pace of sales over the past few months. In addition, builders are recognizing the demand and the opportunity it presents, and they are pushing construction activity higher – about one-third of homes on the market are new construction, more than double normal levels.
The U.S. jobs market remains strong with U.S. companies adding almost half a million jobs last month, as reported by Bloomberg. Capital markets are looking for further clues and a hint about the outlook for the second half of the year in the next payroll employment report.
“The challenge for housing markets is the unfolding dynamic between supply, demand, and borrowing costs,” said George Ratiu, chief economist of Keeping Current Matters in a statement. “The number of homes for sale has been growing, and properties are sitting longer on the market, giving buyers more options and time to decide. At the same time, homeowners have held back from listing, keeping the supply of existing homes in check and driving prices higher. There are also clear signs of seasonality in this year’s housing markets, a good development on the road back toward health. However, we have a way to go to regain balance.”
Lisa Sturtevant, Chief Economist of Bright MLS, said economic conditions will cool in the second half and mortgage rates will come down.
“However, there will be no return to the 3% rates we had during the pandemic,” she said. “Homebuyers have had to accept the ‘new normal’ of rates around 6.5% or even a little higher. With affordability at near-record lows and inventory still very limited, buyers will continue to find the market challenging in the second half of 2023. Home shoppers will have to compromise on the features they want in a home or the neighborhood they are looking in.”