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Upward Drive in Mortgage Rates Continues to Soften Purchase Activity

The latest Primary Mortgage Market Survey (PMMS) from Freddie Mac shows the 30-year fixed-rate mortgage (FRM) up week-over-week, rising to 4.72%, up slightly from 4.67%. A year ago at this time, the 30-year FRM averaged 3.13%.

Also this week, the 15-year FRM averaged 3.91% with an average 0.8 point, up from last week when it averaged 3.83%. A year ago at this time, the 15-year FRM averaged 2.42%.

“Mortgage rates have increased 1.5 percentage points over the last three months alone, the fastest three-month rise since May of 1994,” said Sam Khater, Freddie Mac’s Chief Economist. “The increase in mortgage rates has softened purchase activity such that the monthly payment for those looking to buy a home has risen by at least 20% from a year ago.”

Freddie Mac’s PMMS is focused on conventional, conforming, fully-amortizing home purchase loans for borrowers who put 20% down and have excellent credit.

As rates rise, an increasing number of buyers are being shut out of the market, as the Mortgage Bankers Association (MBA) reported that overall mortgage application volume continued to trend downward, falling 6.3% week-over-week.

“For many American families, today’s mortgage rates are closing the door on being able to afford to buy a home this spring,” said Realtor.com Manager of Economic Research George Ratiu. “We are approaching the tipping point at which market demand is expected to pull back. The silver lining to the current affordability crisis is highlighted in Realtor.com’s new seller report, which shows that many homeowners are planning to list their properties for sale in the next few months. The supply boost would be welcome news for this year’s housing markets.”

A recent survey from Realtor.com found that U.S. home prices have hit another record high for the first time in March 2022, rising to $405,000, up 13.5% from March 2021 when the median listing price was $370,000.

Inventory concerns linger, as also reported by Realtor.com was the number of active listings dipping to 381,950 in March 2022, down 18.9% year-over-year (from March 2021), and down a whopping 62.3% year-over-year (March 2020), during the onset of the COVID-19 pandemic. The result, for every five homes that were for sale before the pandemic, just two homes remain today.

“For lenders and mortgage originators, the labor shortage driving strong employment gains, combined with rising prices, is adding upward pressure on costs leading to higher rates,” added Ratiu. “The bottom line is that mortgage rates are on course to surpass 5%, a level not seen since February 2011, when the typical home in the U.S. was priced at just $166,000–less than half the price of today’s typical home.”

 

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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