US Home Sales Decline as Mortgage Rates Reach 7.10%
In a recent report by Freddie Mac, the 30-year fixed-rate mortgage averaged 7.10% in the week ending April 18, up from 6.88% the week before. This exceeds a psychological threshold that had not been crossed this year, signaling a significant increase in mortgage rates. A year ago, the average 30-year fixed rate was 6.39%.
The rise in mortgage rates can be attributed to expectations that the Federal Reserve will not lower interest rates in the short term. While the Fed does not directly set mortgage rates, their actions influence them, and persistently high inflation readings are keeping the U.S. central bank on hold.
Sam Khater, chief economist at Freddie Mac, stated, “As rates trend higher, potential homebuyers are deciding whether to buy before rates rise further or wait for them to decline later in the year.”
Alongside the increase in mortgage rates, existing home sales in the United States fell by 4.3% in March, reaching a seasonally adjusted annual rate of 4.19 million. This is the largest drop in over a year and reflects the ongoing challenges in America’s housing affordability.
Despite the decline in sales, the median price of an existing home hit an all-time high of $393,500 last month, marking a 4.8% increase from a year ago. This rising trend in home prices, coupled with high mortgage rates, is making it difficult for many Americans to enter the housing market.
While home sales had shown some improvement from decade lows last fall, the momentum has now faded. The Fed’s indication of holding interest rates steady in the near future may further impact the housing market.
NAR Chief Economist Lawrence Yun commented on the stagnant home sales, stating, “Although they have recovered from cyclical lows, home sales are stagnant because interest rates have not seen any significant movement. There are now almost six million more jobs compared to pre-crisis highs, suggesting there are more aspiring homebuyers in the market.”
The combination of rising mortgage rates and high home prices presents a challenging environment for potential homebuyers as they weigh their options in the current housing market.