Publisher's Note: This post appears here courtesy of the The Daily Wire. The author of this post is Ben Zeisloft.
Mortgage rates are approaching 7% as the housing market continues to experience turmoil.
The 30-year fixed mortgage rate remained below 3% for much of the past two years, according to data from government-backed mortgage company Freddie Mac. Since the beginning of the year, however, the rate has surged from just over 3% and reached 6.29% as of last week - marking a 0.25% increase from the preceding week alone.
"The housing market continues to face headwinds as mortgage rates increase again this week,"
Freddie Mac Chief Economist Sam Khater said in a press release last week. "Impacted by higher rates, house prices are softening, and home sales have decreased. However, the number of homes for sale remains well below normal levels."
Contributing to the soaring mortgage rates are actions from the Federal Reserve to raise the target federal funds rate by 0.75%, a move which followed two identical hikes in June and July, in an attempt to relieve elevated inflationary pressures. The policy provoked a stock market selloff.
Mortgage applications have therefore fallen 3.7% in a single week, according to data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The portion of mortgage activity attributable to refinancing dropped from 32.5% to 30.2%.
Meanwhile, the National Association of Realtors' Pending Home Sales Index fell 2% in August and 24.2% year-over-year. "The direction of mortgage rates - upward or downward - is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,"
National Association of Realtors Chief Economist Lawrence Yun remarked in a statement. "If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize."
In the second quarter of 2022, the median sale price of a home in the United States was $440,300, according to data from the Department of Housing and Urban Development, marking a 36% rise from $322,600 in the second quarter of 2020. Home prices are expected to increase another 4% in 2023 - a relative slowdown from 17.8% in 2021 and 12.8% in 2022.
The western portion of the United States has witnessed the most severe slowdown in purchase activity amid the high prices, with the region's Pending Home Sales Index falling year-over-year by 31.3%. "Home prices are the least affordable in the West and, consequently, the region suffered deeper annual declines in contract signings due to rising interest rates when compared to other areas of the country,"
Yun added. "However, the recent increases of the last two months, though small, are encouraging."
The pressures in the housing market are also impacting conditions in the rental space, particularly in large cities on the west coast. In Seattle, Washington, expensive real estate is compelling would-be homebuyers to search for apartments, prompting the city council to unanimously greenlight a special election that will determine whether officials should create more affordable housing, as detailed in an analysis from Zumper.
Six of the 10 cities with the most expensive rental rates for one-bedroom apartments are located in California. Although the national average for one-bedroom rent reached $1,503 in September, some rental markets - such as San Jose, California; Miami, Florida; and Nashville, Tennessee - saw moderate month-over-month decreases in average one-bedroom rent.