‘The housing market may have to go through a correction’: Mortgage rates hit 6.29%, Freddie Mac says

Numbers: Mortgage rates in the United States continue to climb, adding hundreds of dollars in costs to potential homeowners.

The increase in mortgage rates followed the Federal Reserve raising interest rates to deal with the worst inflation the economy has faced in 40 years.

The 30-year fixed-rate mortgage averaged 6.29% as of September 15, according to data released Thursday by Freddie Mac.

That’s an increase of 27 basis points from the previous week – one basis point equals one hundredth of a percentage point.

Rising rates are bad news for potential buyers, as they potentially add hundreds of dollars to their mortgage payments.

Mortgage rates are now at highs not seen since 2008, Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement.

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

Given rising rates and the withdrawal of buyers, 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 15-year mortgage rate also rose over the past week to 5.44%.

The variable rate mortgage averaged 4.97%, up from the previous week.

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

“Influenced by higher rates, house prices are falling and home sales have fallen,” he added.

The country is still facing a shortage of homes for sale. And “many landlords are simply choosing not to sell at all because they don’t want to deal with the tough real estate market,” Daryl Fairweather, chief economist at Redfin, told MarketWatch.

“And that means there are fewer houses on the market. So even if the buyers are pulling back, the sellers are also pulling back,” she added.

Meanwhile, mortgage applications rose in anticipation of further rate hikes last week. Buyers are keen to enter the market before mortgage rates climb even further.

Ultimately, home prices are falling due to rising rates, and sellers’ reaction to lower demand is a “good thing,” Federal Reserve Chairman Jerome Powell said during a briefing. a press conference on Wednesday when they announced the rate hikes.

“Housing prices were rising to an unsustainable level,” Powell said.

“Longer term, what we need is for supply and demand to be better aligned, so that house prices rise to a reasonable level…and people can afford houses again” , he added. “The housing market may need to undergo a correction to get back to this place.”

The yield on the 10-year Treasury note rose TMUBMUSD10Y,
3.721%
above 3.6% in Thursday morning trade.

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

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