Mortgage rates have experienced their seventh straight week of gains due to rising Treasury yields, resulting in a significant slowdown in home purchases. According to Freddie Mac, the average 30-year fixed mortgage rate this week stands at 7.79%, reflecting a 0.16 percentage point increase from the previous week and marking the most considerable weekly jump since early October.
Longest Streak of Weekly Gains Since Spring 2022
Freddie Mac’s chief economist, Sam Khater, notes that this week’s rise in mortgage rates also represents the longest streak of week-over-week gains since spring 2022. As a result, home purchase activity has come to a virtual standstill, with affordability remaining a significant obstacle for many potential buyers. To address this issue, lower rates and increased inventory are crucial.
Contrasting Measures in the Housing Market
The recent surge in mortgage rates may come as a surprise given the stronger-than-expected contract signings reported in September. New home sales saw a 12.3% increase from the previous month, while pending home sales rose unexpectedly. However, it remains uncertain how the highest rates in 23 years will impact home sales in October. Despite a decline in mortgage application volume, some buyers are still active in the market. Notably, adjustable-rate mortgage applications accounted for the largest share of total applications since November 2022, according to the Mortgage Bankers Association.
Cash Buyers and Mortgage Rates
It is important to note that cash buyers, who made up a larger portion of total existing-home purchases than first-time buyers in September, are less influenced by mortgage rates. The National Association of Realtors confirms this trend. Therefore, fluctuations in mortgage rates may not significantly impact the decisions of cash buyers.
Potential Relief for Prospective Buyers
There might be some near-term good news for prospective buyers eagerly awaiting lower rates after a prolonged period of mortgage rate gains. The 10-year Treasury yield, which often correlates with mortgage rates, saw a decline this morning. Only time will tell how this reduction in yields will translate into home sales in the coming months.