Mortgage interest rates exceeded 7% for the first time this year, according to new data It was released Friday by Freddie Mac.
The average interest rate on a 30-year fixed-rate mortgage was 7.1% this week, up from 6.88% the previous week.
“With interest rates trending higher, potential homebuyers are looking to either buy before rates rise further or buy in hopes of lower rates later this year,” Sam Cater, chief economist at Freddie Mac, said in a statement. I am deciding whether to refrain from doing so.”
“Purchase applications increased modestly last week, but it remains unclear how many homebuyers will be able to withstand future interest rate increases,” Carter added.
Existing home sales fell 4.3% last month to an annual rate of 4.19 million units, but home prices rose 4.8% to $393,500, according to data released by the agency Friday. National Association of Realtors (NAR).
Lawrence Yun, NAR’s chief economist, blamed relatively low home sales on continued high interest rates.
“Although the economy has recovered from its cyclical lows, home sales are stagnant as interest rates have not moved significantly,” Yun said in a statement. “There are now nearly 6 million more jobs compared to pre-COVID-19 highs, suggesting there are more motivated homebuyers in the market.”
Mortgage interest rates rose to nearly 8% in late October and were above 7% in early December. Interest rates rose from 2022 to 2023 as the US Federal Reserve (Fed) repeatedly raised interest rates.
The central bank has raised interest rates to their current 20-year high in a bid to curb inflation, which has soared to a 40-year high by mid-2022. Inflation has since eased significantly, and the Fed has stopped raising interest rates, raising hopes for a rate cut later this year.
But stubborn inflation and a strong labor market have dampened expectations for a rate cut in the near term, with traders now expecting few cuts until September.
Federal Reserve Chairman Jerome Powell signaled earlier this week that it would likely take “longer than expected” for the central bank to gain confidence that inflation is heading in the right direction, suggesting it would hold off on cutting interest rates.
“While recent data shows solid growth and continued strength in the labor market, there has been no further progress on returning to the 2% inflation target so far this year,” Powell said on Tuesday. It also shows.”
He added: “Recent data clearly does not give us much confidence and instead indicates that achieving that confidence is likely to take longer than expected.”
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