Uptick continues to dampen homebuying activity
Mortgage rates rose slightly after the Federal Reserve announced another interest rate hike during its latest policy meeting this week.
After a significant decline last week, the average 30-year fixed-rate mortgage climbed from 6.78% to 6.81% as of July 27, Freddie Mac Primary Mortgage Market Survey showed. The 15-year mortgage rate averaged 6.11%, up from 6.06% a week ago.
“Higher interest rates continue to dampen activity in interest rate-sensitive sectors, such as housing,” said Freddie Mac chief economist Sam Khater. “However, overall US consumer confidence is unwavering, surging to a two-year high in the Conference Board’s Consumer Confidence Index for July 2023. Rising consumer confidence often leads to greater spending, which could drive more consumers into the housing market.”
The Fed has raised its benchmark interest rates by 25 basis points to a range of 5.25% to 5.50%, close to its highest level since the 2008-2009 financial crisis.
Marty Green, principal at mortgage law firm Polunsky Beitel Green, commented: “Inflation continues to moderate and, for now, the economy appears to be poised for a very difficult-to-achieve soft landing. This gives the Fed more runway to continue its inflation fight.”
However, Green warned that this soft landing can become very bumpy if the Fed doesn’t recognize that the time has come for it to patiently let the cumulative effect of its decisions work through the economy.
“The housing sector is again showing signs of slowing, with inventory once again a critical issue,” he said. “The higher mortgage rates triggered by the Fed’s policy have caused more sellers to sit on the sidelines given the large differential between the rate they enjoy on their current home compared to the possible interest rate on any home they may purchase today. This means buyers have fewer choices and may sit on the sidelines as well. If the Fed isn’t careful, this critical industry may once again slow to crawl in the fall and winter.”
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