Source: Yahoo! Life —
Builders and real estate agents alike are celebrating signs of life in the U.S. housing market. That’ll happen when a mild home price correction coupled with mortgage rates falling from 7.37% in early November to 5.99% in February improves affordability a bit just as the market enters its busy season.
But those builders and agents might want to avoid getting too excited: Already, mortgage rates are back on the rise.
On Friday, the average 30-year fixed mortgage rate swung back up to 6.8%. Over the past few weeks, rates have steadily climbed as financial markets, which have seen stronger than expected economic and inflationary data, are pricing in higher odds of the Fed holding interest rates higher for longer.
That 6.8% mortgage rate is the highest reading measured by Mortgage News Daily since early November. It also means that affordability is once again deteriorating.
A borrower who took on a $500,000 mortgage in early February 2023 at a 5.99% fixed rate would have gotten a monthly principal and interest payment of $2,995. At a 6.8% rate (i.e. the average rate on Friday), a borrower would get a $3,260 monthly payment on the same size loan.
At first glance, there’s nothing historically abnormal about a 6.8% mortgage rate. However, that understates its impact. See, it’s less about the numerical mortgage rate and more about the total monthly mortgage payment as a percentage of new borrowers’ incomes. And when accounting for everything (i.e. house prices, incomes, and mortgage rates), the Federal Reserve Bank of Atlanta says, housing affordability is as bad now as it was right before the housing bubble burst in 2007.
