Mortgage rates rose again in early October, slowing down the already struggling housing market. Freddie Mac’s latest Primary Mortgage Market Survey shows that the average rate for 30-year mortgages had jumped from 7.31% to 7.49% in just a week and from 6.66% a year ago. On 15-year loans, the rate went up from 6.78% to 6.71%. It was 5.9% last year.
Freddie Mac economist Sam Khater said several factors were contributing to the rise, including inflation, the job market, and uncertainty surrounding the Federal Reserve’s plans for interest rates. “Unsurprisingly, this is pulling back homebuyer demand,” said Khater.
A separate report from the Mortgage Bankers Association says that mortgage applications had dropped by 6% in October, and by 22% since last year. They are now at the lowest levels since 1996. The Federal Reserve meanwhile hints that interest rates will remain high, at least until 2024. The number of homes for sale is consequently falling, and a Realtor.com report says they were down 9.2% in August.
The average cost of an American home was $230,000 in 2010, but by May this year, this had increased to $330,000, and experts say there are a variety of causes, including interest rate hikes aimed at stemming inflation and the rising cost of finance. The trend of older people selling homes to move to retirement facilities has fallen dramatically since the pandemic and squeezed the market even tighter.
Housing prices vary from state to state, however, and some cities and regions have seen prices fall. In Chicago, for instance, prices rose by 4.4% over the summer of 2023, but in Las Vegas, they dropped 7.2%. In the Midwest, prices have increased on average 3.2% since 2022, and 3.2% in the Northeast. Nationally, the average cost of housing has grown 5.3% since January.
The troubled housing market will only add to the concerns of Americans worried about their economic future. In September, the Consumer Price Index reported a 3.7% inflation increase since August.