US mortgage rates are up again after two straight weeks of declines, as the cost of homeownership continues to price buyers out of the housing market.
That’s causing some potential buyers to back out of deals, lessening competition and increasing the number of homes available for sale.
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Freddie Mac’s latest Primary Mortgage Market Survey released Thursday shows the average rate for a 30-year fixed-rate mortgage is now at 5.51%, up from 5.3% last week. Last year at this time, the rate for America’s most popular mortgage product averaged 2.88%.
The average for a 15-year fixed-rate note is also up, climbing to 4.67% from 4.45% a week ago. For the same week in 2021, the 15-year rate sat at 2.22%.
“Mortgage rates are volatile as economic growth slows due to fiscal and monetary drags,” said Sam Khater, Freddie Mac’s chief economist. “With rates the highest in over a decade, home prices at escalated levels, and inflation continuing to impact consumers, affordability remains the main obstacle to homeownership for many Americans.”
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According to data from the Mortgage Bankers Association, the average purchase loan size has declined from the record high of $460,000 reached in March, dropping to $415,000 for the week ending July 8.
Meantime demand for mortgage applications has fallen for two weeks in a row. It’s the latest sign the housing market is cooling as Americans grapple with 40-year-high inflation squeezing their budgets and rising interest rates inflating the cost of their monthly mortgage payment.
An increasing number of would-be buyers are also getting jitters and backing out of deals.
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Last month, home sale cancellations hit their highest rate since the start of the pandemic, with roughly 60,000 home purchase agreements falling through according to an analysis by Redfin.
“When mortgage rates shot up to almost 6% in June, we saw a number of buyers back out of deals,” Lindsay Garcia, a Redfin real estate agent in Miami, said. “Some had to bow out because they could no longer get a loan due to the jump in rates. Buyers are also more skittish than usual due to economic uncertainty.”
Redfin’s chief economist, Daryl Fairweather, said in a statement Thursday that the drop in demand is already here, pointing to a new report by the real estate brokerage showing the number of homes for sale nationwide increased last month for the first time in three years.
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“The country’s economic woes have already cooled the housing market, and they’re likely to continue dampening demand,” Fairweather said. “The Fed has signaled it may increase interest rates further to combat stubbornly high inflation, which could harm consumer confidence, and lower stock prices mean fewer prospective homebuyers can afford a down payment.”
He advised sellers to commit, saying, “If you decide to sell, do it quickly before demand falls further. And price carefully—this is not the time to test the waters. You’ll do more harm than good if you overprice and have to do a price reduction or take the home off the market.”
FOX Business’ Lucas Manfredi contributed to this report.