Realtor.com Chief Economist Daniel Hale analyzes housing affordability on “Maria Bartiromo’s Wall Street.”
Important measures home purchase Applications fell sharply last week as mortgage interest rates rose to their highest level in two months.
Mortgage Bankers Association (MBA) Index Applying for a mortgage loan New data released on Wednesday showed that stocks fell 10.6% in the week ending February 16, compared with a 2.3% decline in the previous week.
The data also showed that the average interest rate on popular 30-year loans rose to 7.06% last week. Although the rate has fallen from a peak of 8% in October, it is the highest interest rate since December 2023.
“Mortgage rates rose more than 7% last week on news that inflation accelerated in January, dampening hopes for short-term rate cuts,” said Mike Fratantoni, chief economist at the MBA. .
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Homes for sale in Cupertino, CA on February 7, 2024. (Photographer: Lauren Elliott/Bloomberg via Getty Images/Getty Images)
As interest rates rise, demand for housing has stopped. Applications for mortgages to buy houses fell 10% from the previous week. The number of applications decreased by 13% compared to the same period last year.
According to the survey, refinancing demand also fell last week, dropping 11% from the previous week. Compared to the same period last year, the number of refinance applications increased by just 0.1%.
“Potential homebuyers are very sensitive to these rate changes, as both rising interest rates and rising home values have put pressure on affordability in a supply-constrained market,” Frantantoni said. “It has become,” he said.
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February 7, 2024. Home in San Jose, California. (Photographer: Lauren Elliott/Bloomberg via Getty Images/Getty Images)
The housing market, which is sensitive to interest rates, is rapidly cooling down. federal reserve Aggressive tightening campaign. Policymakers have raised the benchmark federal funds rate 11 times in 16 meetings to quell stubborn inflation and slow the economy.
At their most recent policy meeting in January, officials indicated they had completed raising rates but were not yet ready to cut them. Investors had previously embarked on a series of aggressive rate cuts starting as early as March.
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Most economists now expect interest rate cuts to begin in May or June, with signs that inflation remains unusually high.
Rising mortgage rates not only reduce consumer demand, but also limit inventory. Sellers who locked in low mortgage rates before the pandemic are reluctant to sell as interest rates continue to hover near 20-year highs, leaving eager buyers with few options. .
Available housing supply remains an astonishing 34.3% lower than typical pre-crisis volumes. COVID-19 pandemic It started in early 2020, according to another report published by Realtor.com.
