KEY TAKEAWAYS
- The average rate on a 30-year mortgage has risen to a 21-year high, putting more pressure on homebuyers.
- Home prices have stayed resilient even amid higher mortgage rates because the low number of homes for sale has kept buyers from shopping around too much.
- The latest uptick in rates could prove to be a breaking point that sends home prices downward again, economists said.
Mortgage rates surging to 21-year highs are putting more stress on the housing market, and could send the recent rebound in home prices into reverse.
The average rate offered for a 30-year fixed mortgage rose to 7.09% on Thursday, its highest since 2002, according to Freddie Mac. That could put more strain on homebuyers already struggling to afford to buy, and may put downward pressure on prices.1
“The latest rise in rates is likely to throw a deep chill into housing markets,” Douglas Porter, chief economist at BMO Capital Markets, said in a commentary.
Home prices hit new record highs this summer as buyers competed for an unusually low number of homes for sale. Home prices fell in the second half of 2022, but have gained that ground back this year amid moderate price increases. Mortgage rates at multi-decade highs could upset that balance.2
The housing market could be vulnerable to a downward price correction, Matthew Walsh, an economist at Moody’s Analytics, wrote in an analysis Thursday. He said the recent rebound in prices is “a bit surprising” given the high mortgage rates, and expects them to start falling again soon.
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Source: www.investopedia.com
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