Economic Report: Bad news for home buyers: Mortgage rates inch towards 7%, highest level in 2023

by | Feb 21, 2023 | Stock Market

Mortgage rates are back up, hitting a fresh high for the year. The average on the 30-year fixed-rate mortgage was 6.87% as of Tuesday afternoon, while the 15-year was at 6.07%, according to Mortgage News Daily.

Rates are officially at the highest level for the year. But to be clear, rates have been higher — they surpassed the 7% threshold, and reached 7.37% back in October, per MND’s data. The jump in rates “has significant impact on payments and affordability, so you have to assume that means fewer buyers in the market,” Mike Simonsen, founder of Altos Research, said in a recent YouTube
video. Based on the median value of an existing home in the U.S., which was $359,000 as of January, with 20% down payment, the typical mortgage would cost a would-be homebuyer about $2,300 a month, according to MND’s mortgage calculator. More than two weeks ago, rates went below 6%, to 5.99% on Feb. 2. A buyer at that point would have ended up paying roughly $170 less per month. Mortgage rates jumped in the last few days after the U.S. government released the inflation report for January. The inflation report revealed that the economy was still hot, which prompted the market to expect the Fed to keep raising its benchmark interest rate. Buyers could wait even longer to see if rates go down, but the timing will be tricky. “There is enough pent-up demand competing over relatively few homes to lead to stable or even rising prices in many local markets,” Lisa Sturtevant, chief economist at Bright MLS, wrote in a note last week. And so “due to this pent-up demand, a lot of people will accept that rates above 6% constitute the ‘new normal’ in the housing market,” she added.

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