‘Housing market may have to go through a correction’: mortgage rates hit 6.29%, says Freddie Mac

The numbers: US mortgage rates continue to climb, costing potential homeowners hundreds of dollars.

The rise in mortgage rates followed the Federal Reserve raising interest rates again to address the worst inflation the economy has faced in 40 years.

The average 30-year fixed rate mortgage was 6.29% on September 15, according to data released by Freddie Mac on Thursday.

That’s up 27 basis points from the previous week — one basis point is equal to one-hundredth of a percentage point.

The rate hike is bad news for potential buyers, as it could add hundreds of dollars to their mortgage payments.

Mortgage rates are now higher than they have been since 2008, Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement.

The typical mortgage applicant’s monthly payment is $456 more than it was in January, he said.

Because of the rise in rates and buyers pulling back, the median price of an existing home in the United States fell to $389,500 in August from $403,800 the previous month, the National Association of Realtors said.

A year ago, the 30-year mortgage rate was 2.88%.

The average rate on the 15-year mortgage also rose in the past week to 5.44%.

The average adjustable rate mortgage was 4.97%, up from the previous week.

“The housing market remains defiant as mortgage rates rise again this week, after the 10-year Treasury jumped to its highest level since 2011,” Sam Khater, chief economist at Freddie Mac, said in a statement.

“Higher rates are having an impact, home prices are going down, and home sales are down,” he said.

There is still a shortage of houses for sale in the country. And “many homeowners are choosing not to sell at all, because they don’t want to face the tough housing market,” Daryl Fairweather, chief economist at Redfin, told MarketWatch.

“And that means fewer houses on the market. So while buyers are supported, sellers are also being supported,” she said.

Meanwhile, mortgage applications rose on expectations of further rate hikes last week. Buyers are eager to get in the market before mortgage rates go even higher.

Ultimately, home prices are falling as a result of higher rates and sellers responding to lower demand is “a good thing,” Federal Reserve Chairman Jerome Powell said during a press conference on Wednesday when they announced rate hikes.

“Housing prices were rising at an unsustainably fast rate,” Powell said.

“In the long term, what we need is for supply and demand to align better, so that housing prices rise at a reasonable level … and people can afford homes again,” he said. . “The housing market may have to go through a correction to get back to that place.”

The yield on the 10-year Treasury note TMUBMUSD10Y rose,
3.705%
up 3.6% in Thursday morning trading.

Do you have thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com

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