Mortgage Rates Defy Expectations, Continue to Rise
Despite anticipation of relief from Federal Reserve rate cuts, U.S. mortgage rates have climbed for the fourth consecutive week, reaching 6.54% by October 24, 2024. This marks a peak unseen since August, although still below this year’s high of 7.22% from May.
Housing Demand Wanes as Borrowing Costs Increase
The upward trend in mortgage rates has started to weigh on homebuyers, with sales of previously owned homes slipping 1% in September from the prior month. The annual adjusted rate now stands at 3.84 million homes sold, the lowest since 2010, according to the National Association of Realtors (NAR).
Experts Weigh In on the Housing Market
Analysts suggest that the rate dip might have come too late in the season for most buyers, who typically enter the market in spring when families can more easily plan around the school year. Some buyers may also hold out, hoping that rates might drop even further since the Fed has signaled plans to continue adjusting rates through 2025.
The Burden of High Home Prices and Insurance Costs
For buyers, each small uptick in rates raises monthly payments, adding to the burden of high home prices, which have risen for the 15th straight month, according to NAR data. Increased home insurance costs are also stretching family budgets.
Strong Economic Data Drives Mortgage Rates Up
Analysts attribute the recent rise in mortgage rates to strong economic data rather than Fed policy. The 10-year Treasury yield, which many expected to fall with anticipated Fed rate cuts, has driven yields up due to stronger-than-expected economic performance.
Government Debt and Its Impact on Mortgage Markets
The government’s financial situation, including budget deficits and the looming 2024 election, adds pressure to the Treasury market. According to projections, a second Trump presidency could expand the national debt by $7.5 trillion by 2035, compared to $3.5 trillion under a Harris presidency, intensifying concerns around long-term debt.
Homebuyers Adopt a Wait-and-See Approach
Waiting remains the common strategy for hopeful homebuyers, who are hesitant to commit to current rates. Many are seeking stability in their future payments, and affordability – whether through lower rates or home prices – is their deciding factor.
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