Just before the start of the new year, mortgage rates increased for the first time in six weeks.
Bloomberg reported that Freddie Mac data showed a rate increase from 6.27 percent to 6.42 percent for 30-year fixed-rate loans. It closes out a year in which mortgage rates more than doubled, making potential buyers unable to purchase homes and holding sellers to their existing homes.
Bloomberg quoted Realtor.com’s head of economic research, George Ratiu, as saying that higher mortgage rates remain a significant barrier to successful transaction closings.
Home sales are taking longer because more buyers are sitting on the sidelines. Due to this, inventory has increased, but there are still fewer listings available than during the pandemic.
It’s the biggest gain since 2015, according to the latest Redfin report, with properties for sale up 18 percent since last year. In November, brokerages reported a 35.1% drop in home sales year-over-year – the biggest drop since 2012 when it began tracking sales.
As a result of higher borrowing rates, Ratiu estimates the median price of a home compared to last year would increase by about 60 percent or about $2,100 a month without taxes or insurance.
In response to an increase in 10-year treasury bond yields, mortgage rates increased, indicating more investors were seeking safe investments. Consumers are paying six percent more for goods and services than they did a year ago, according to a key inflation metric released early last month.
A two percent inflation rate is the Federal Reserve’s target, indicating it will continue to use higher interest rates to stem high prices and wages.