After mortgage rates took a giant leap toward the 7% mark three weeks ago on the heels of the Fed’s announcement of yet another rate hike, rates have crept upward incrementally in the following weeks, as Freddie Mac reported the 30-year fixed-rate mortgage (FRM) averaged 6.94% with an average 0.9 point as of October 20, 2022, up from last week when it averaged 6.92%. A year ago at this time, the 30-year FRM averaged more than half that rate when it stood at 3.09%.
“Mortgage rates slowed their upward trajectory this week,” said Sam Khater, Freddie Mac’s Chief Economist. “The 30-year fixed-rate mortgage continues to remain just shy of 7% and is adversely impacting the housing market in the form of declining demand. Additionally, homebuilder confidence has dropped to half what it was just six months ago and construction, particularly single-family residential construction, continues to slow down.”
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) for September 2022 on new residential construction statistics found that privately‐owned housing starts at a seasonally adjusted annual rate of 1,439,000, 8.1% below the revised August estimate of 1,566,000, and 7.7% below the September 2021 rate of 1,559,000. Single‐family housing starts in September were at a rate of 892,000–4.7% below the revised August figure of 936,000.
“Buyers, builders and sellers alike have taken a step back to consider their best course of action given heightened mortgage rates and persistent inflation,” said Realtor.com Economic Data Analyst Hannah Jones. “Home purchase sentiment hit its lowest level since 2011 and home builder sentiment fell for the 10th month in a row in September as construction activity slowed. Sellers are responding to the shift in the market and pulling back on listing activity, resulting in a 9.8% decrease in new listings compared to last year.”
Further, the National Association of Home Builders (NAHB) reported that builder confidence in the market for newly built single-family homes dropped eight points in October to 38—half the level it was just six months ago—marking the lowest confidence reading since August of 2012 (with the exception of the onset of the pandemic in the spring of 2020).
Freddie Mac also reported the 15-year FRM averaged 6.23% with an average 1.1 point, up from last week when it averaged 6.09%. A year ago at this time, the 15-year FRM averaged 2.33%. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.71% with an average 0.4 point, down from last week when it averaged 5.81%. A year ago at this time, the five-year ARM averaged 2.54%.
Along with the rise in rates is a decline in overall mortgage applications, as the Mortgage Bankers Association (MBA) reported that overall mortgage application volume fell week-over-week, dropping 4.5% for the week ending October 14, 2022.
“Mortgage applications were down again last week as mortgage rates hit 20-year highs, and ongoing economic uncertainty and affordability challenges continue to impact borrower demand,” said Bob Broeksmit, CMB, President and CEO of the MBA. “The overall ARM loan share was at a 14-year high, as prospective buyers turn to various ARM products to reduce their monthly mortgage payment. Even at 13%, however, the share of ARM applications is still roughly a third of the peak seen in the early 2000s.”