Mortgage demand plummeted to a 28-year low as the average long-term rate creeped up toward 8%.
According to leading real industry group Mortgage Bankers Association, the average rate on the benchmark 30-year home loan climbed to 7.53% this week — the highest rate since 2000.
A separate report on Bankrate showed that Thursday’s average on a 30-year fixed mortgage rate was even higher, 7.88%.
The rate was 6.75% at this time last year and mortgages below 3% were offered at the start of 2021. The mortgage rate hasn’t hit 8% since 1995.
Mortgage applications and applications to refinance a home have stalled dramatically, falling 6% and 7% for the week, respectively, according to MBA.
“The purchase market slowed to the lowest level of activity since 1995, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the market,” MBA’s deputy chief economist Joel Kan told The Post.
The higher rates add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already unaffordable to many Americans.
They also discourage homeowners who locked in low rates two years ago from selling.
The lack of housing supply also weighs on sales of previously occupied US homes, which are down 22.3% through the first seven months of the year versus the same stretch in 2022.
In response, Kan noted that applications for adjustable-rate mortgages increased, making up 8% of purchase applications — up from 6.7% a month ago when interest rates sat around 7%.
ARMs typically offer lower interest rates, though they’re fixed for shorter periods of time.
Mortgage rates have been rising along with the 10-year Treasury yield, which has historically been considered a key benchmark for mortgage rates.
Thus, as mortgage rates near 8%, the 10- and 30-year Treasury yields have also reached new heights, hitting 4.8% and 4.925%, respectively, on Tuesday — both the highest since 2007.
The advances could keep upward pressure on inflation, giving the Federal Reserve reason to keep interest rates higher for longer.
In August, US inflation rose 3.7% from 2022. Though it’s still above the Fed’s 2% goal, it’s a stark difference from June 2022’s four-decade peak at 9.1%.
Inflation’s substantial cooldown in recent months has forced many home sellers to slash their asking prices to lure in potential buyers.
Those who don’t slash their asking price risk selling at a loss. Last month, a report by real estate brokerage Redfin revealed that home sellers in America’s major cities are already doing this.
San Francisco sellers had it the worst, Redfin’s report showed, as they are a whopping four times more likely than the average US home seller to take a loss.
Detroit is home to the second-highest share of homeowners who take a loss in their home-selling transactions, at 6.9%, followed by Chicago and New York, where 6.5% and 5.9% of homeowners take a loss in selling their homes, respectively.
Though the share of New York homeowners who reported a loss was half that in San Francisco, the cities were tied for the largest median loss in dollars, at $100,000, Redfin found in a separate analysis.
