Fixed-rate mortgages hit 20-year high –

After a week of small declines in fixed rate mortgages (FRM), Freddie Mac announced that the 30-year FRM averaged 6.92%, up 26 basis points for the week ending October 13. 2022, up from last week’s reading of 6.66%. A year ago around this time, the 30-year FRM averaged more than half of that total, at 3.05%.

“Rates resumed their record high this week, with the 30-year fixed rate mortgage hitting its highest level since April 2002,” said Sam Khater, chief economist at Freddie Mac. “We continue to see the story of two economies in the data: strong job and wage growth keep consumer balance sheets positive, while persistent inflation, recession fears and housing affordability a precipitous drop in demand for housing. The next few months will undoubtedly be important for the economy and the housing market.

Also this week, the 15-year FRM averaged 6.09% averaging 1.1 points, up from last week when it averaged 5.90%. A year ago at the same date, the 15-year FRM averaged 2.30%. The five-year Treasury-indexed hybrid variable rate mortgage (ARM) averaged 5.81% with an average of 0.2 points, up from last week when it averaged 5, 36%. A year ago at this time, the five-year ARM averaged 2.55%.

“Housing markets continue to feel the direct impact of rising mortgage rates,” added George Ratiu, senior economist for “With incomes below inflation, homebuyers’ ability to finance a purchase has been reduced by mortgage rates that have risen from 3.1% at the start of 2022 to nearly 7%. For a family earning the median household income of $71,000 and using a 20% down payment, a typical home purchase budget was $448,700 in January 2022. This week, the same family could not afford that $339,200 home.

The continued ascent of mortgage rates again led to a drop in the total volume of applications, as the Mortgage Bankers Association (MBA) reports that the overall volume of applications for mortgages fell by 2.0% from one week to the other, while the refinancing volume rate was 86% lower than the same week just a year ago.

“Volumes of refinance and home purchase applications have declined and continue to be even lower than last year’s record highs,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “The news that job growth and wage growth continued in September is positive for the housing market, as higher incomes support housing demand. However, he also pushed back on the possibility of a near-term pivot from the Federal Reserve on his plans for further rate hikes.

As Fratantoni mentions, the Bureau of Labor Statistics (BLS) reported that the US economy added 263,000 jobs in September, as the unemployment rate fell to a more than 50-year low of 3.5%.

Fannie Mae’s latest Home Buying Sentiment Index (HPSI) slipped 1.2 points in September to 60.8, its seventh consecutive monthly decline, amid growing affordability constraints. Consumers surveyed continued to express gloomy sentiments in the market as respondents expect mortgage rates to continue to rise over the next 12 months and, for the first time since May 2020, more than respondents expect house prices to fall. In September, just 19% of consumers said now was a good time to buy a home, down from 22% the previous month, while 59% said now was a good time to sell.

“Homebuyers are reacting to deteriorating affordability conditions by moving away from expensive cities, seeking lower-cost markets across the country,” Ratiu said. “The latest report from highlights that the most in-demand housing markets are clustered in the Midwest and more affordable Northeast regions, where the average list price for the 20 hottest markets is $364,000. , a 15% discount from the national median.

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