Mortgage Rates Jump Above 6%
Mortgage rates jumped more than a quarter point this week and remain at the highest level in 14 years, offering no relief to sidelined homebuyers. The average rate on the 30-year fixed mortgage increased to 6.29% from 6.02% last, marking the highest point since the last week of October 2008. Rates are more than 3 percentage points higher than at the start of the year. Rapidly rising rates this year have only made what was an unaffordable housing market for many even worse, forcing those would-be buyers to pause their purchasing plans. Those who remain, though, are finding it easier to negotiate with sellers than when the year began. In many locations, price cuts may be the only viable option to restore housing balance and affordability. The jump in the 30-year rate came as the Federal Reserve reiterated its steadfast commitment to rein in runaway prices after it increased its short-term benchmark rate by three-quarters of a point as expected. The yield on the 10-year Treasury, which fixed mortgage rates tend to track, jumped to the highest level since 2011. Mortgage rates soon followed. The Fed also started to reduce the amount of mortgage-backed securities it holds on its balance sheet this month. The volume of mortgage applications for purchases is down 30% year over year. Sales of previously owned homes also declined for the seventh straight month in August, bringing down the median listing price for the second consecutive month. The price stood at $389,500 in August, down $24,000 from the record high of $413,800 in June — but still 7.7% higher than a year ago. The monthly payment of the median-priced home at the 30-year rate is about $900 higher than a year ago, or nearly $11,000 more per year. Approximately 11% of homes for sale had a price cut last month, up 19.4% year over year and close to averages from 2017 to 2019. Fewer homes sold above list price in August, according to a separate study by Redfin, with 35% going for above asking, down from 49% a year ago. Home builders, too, have been offering concessions as the buyer pool shrinks. Nearly 25% of builders reported reducing their price this month, up from 19% in August, while half said they offered mortgage rate buy-downs and free amenities, among other inducements to close sales. Everyone is paying points, so closing costs are not 2% to 2.5% of the purchase price anymore, they're 3% to 3.5%. That's additional money they need to bring to the table to get the rate they want.