Housing Market Rolls Over As Mortgage Rates Hit Seven Year High
The 30-year fixed-rate mortgage rose for the fifth consecutive week to 4.72%, a high not seen since April 28, 2011 when it was 4.78%. The average 15-year rate rose to 4.16% from 4.11%, Freddie Mac said in a said in a statement on Thursday.
According to nationalized company, among the reasons listed for the continued rise in rates are: the robust economy, rising Treasury yields and the anticipation of more short-term rate hikes caused mortgage rates to move up.
Of course, the "robust economy" and higher rates are now turning against new homebuyers, as the highest rates in years make purchases of a home prohibitively costly to new buyers. The latest confirmation of the slowdown in housing came earlier today when the NAR reported that pending home sales declined to the lowest level in 7 months. Late last week, Bank of America went so far as to call the top in the US housing market in a note in which the bank urged clients to "call your realtor," as the peak in home sales has been reached and "housing is no longer a tailwind." It also confirmed what we wrote back in July in "Housing Market Headed For "Broadest Slowdown In Years."
"Interest rates are rising because the economy is getting better," said Greg McBride, chief financial analyst at Bankrate.com. "But the rising interest rates can start to take a toll on borrowers after a point. In the mortgage market, we’re starting to reach that point."
Those potential homeowners who are hoping for conditions to change will have to wait: borrowing costs will continue rising throughout the year, with 30-year fixed rates hitting 5 percent before 2019, according to Danielle Hale, chief economist for Realtor.com. The 30-year average was 3.83 percent a year ago.
"Although this will take some of the pressure off home prices, it will come at the expense of home sales, which are already struggling," Hale said, confirming that housing is now rolling over and what happens next could be ugly, if the events of 2007 are any indication.
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