Mortgage Rates Surge to Near 7%: A New Reality for Homebuyers
The start of the year has brought a significant shift in the mortgage landscape, with rates climbing to alarming heights. As of last week, the average 30-year fixed-rate mortgage has reached 6.91%, up from 6.85% just a week prior, according to Freddie Mac data. This marks a substantial increase, with 15-year mortgage rates also experiencing a notable jump to 6.13%.
A Six-Month High: The Impact on Affordability
Sam Khater, Freddie Mac’s chief economist, notes that mortgage rates have reached their highest point in nearly six months, hovering just shy of 7%. This surge in rates has significant implications for homebuyers, who are already grappling with elevated home prices. Khater emphasizes that the market’s affordability headwinds persist, making it increasingly difficult for prospective buyers to enter the market.
A Third Consecutive Week of Rate Gains
This marks the third straight week of rate increases, with no signs of easing in sight. The current landscape is characterized by high rates and elevated home prices, which have effectively shut many buyers out of the market. Despite these challenges, there are indications that some buyers are pushing forward with home purchases, undeterred by the affordability hurdles.
Housing Contract Signings Defy Expectations
In a surprising turn of events, housing contract signings rose in November to reach the highest level since early 2023, according to the National Association of Realtors. This suggests that some buyers are adapting to the new reality of higher rates and finding ways to navigate the market.
Seasonal Slowdown: A Temporary Reprieve?
The final week of 2024 saw a sharp decline in demand for mortgages, attributed to a combination of holiday market slowness and rates nearing 7%. According to the Mortgage Bankers Association, applications to purchase a new home fell 13% through Friday compared to two weeks earlier, while refinancing applications were down 36%. However, it’s essential to note that late December is typically one of the seasonally slowest times for the housing market, as buyers and sellers often pause amid the holidays and colder weather.
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