Rising mortgage rates this week cast further doubt on meaningful rate cuts happening soon for homebuyers.
The average rate for a 30-year loan inched past 7% this week, settling at 7.07% on Wednesday, according to Mortgage News Daily.
A separate measurement tracking weekly average rates rose to 6.82% from 6.79%, Freddie Mac reported.
Homebuyers continued to pull back as affordability challenges worsened and consumer optimism diminished over how soon and how much interest rates could ease this year. Waiting for loan rates to decline is now the top reason buyers say they are not actively searching for a home.
“Elevated mortgage rates have been a persistent market challenge, holding back first-time homebuyers and repeat homebuyers alike, albeit for different reasons,” said Danielle Hale, chief economist at Freddie Mac. “In order for rates to decline meaningfully and sustainably, inflation needs to be convincingly on a path to the Fed’s 2% target.”
Read more: Mortgage rates remain around 7% — is this a good time to buy a house?
Homebuyers stay on the sidelines
Homebuyer affordability continued to decline, with the US median mortgage payment increasing 2% monthly in February and 6% annually to nearly $2,200, according to the Mortgage Bankers Association (MBA).
Rising mortgage payments across the US — driven by either higher interest rates or higher home prices, or both — have considerably cooled buyers’ demand.
The volume of home-purchase applications stayed unchanged this week and dropped 13% compared to the same week one year ago, MBA data showed.
“Challenging affordability conditions and low housing supply are keeping some prospective homebuyers on the sidelines this spring,” Edward Seiler, MBA’s associate vice president, said. “The eventual, expected decline in rates in the coming months will hopefully spur new activity in the housing market.”
Expectations of a rate decline have been waning, though. Investors are now betting the Fed will cut rates by less than a percentage point instead of the 1.5% forecast at the beginning of 2024.
Despite the market shift, Fed Chair Jerome Powell recently assured the public that inflation is easing and the central bank is still expected to cut rates at “some point” this year.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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2024-04-04 19:58:56