Lost on Wednesday in a barrage of (for once favorable) inflation headlines and (for once auspicious) news out of the Mideast was another painful increase in average mortgage rates for untold millions of Americans still locked out of the “dream.”
The selloff at the long-end of the Treasury curve over the last several weeks drove a sharp increase in financing costs, leaving sidelined buyers once again in the lurch.
On the MBA’s gauge, the 30-year fixed rose to 7.09% over the week, the highest since May, when rates embarked on a virtually uninterrupted (and very welcome) descent to as low as 6.13% on the eve of the September FOMC meeting. It’s been all uphill from there.
As the figure shows, the latest increase was the fifth in a row. Rates have only fallen in three of the last 16 weeks.
“Bond yields in the US and abroad continued to move higher in response to concerns over a sticky inflation outlook and still too-high budget deficits, which pushed mortgage rates higher for the fifth consecutive week,” MBA VP Joel Kan sighed.
In that context (and a lot of other contexts besides), Wednesday’s ostensibly benign inflation readout was great news for home shoppers, not because it signaled a reprieve on the price front (it really didn’t), but rather because the bond rally it catalyzed will at least be good for a little relief on the financing side (assuming it isn’t quickly reversed).
Some argue Americans are now resigned to higher rates and thereby won’t let that stand in the way of a purchase. That might be true for some buyers, but certainly not for everyone: For a lot of people, the only way to make the math work given how far prices have risen post-COVID is for rates to go down, which is to say they couldn’t bite the proverbial bullet at 7% even if they wanted to.
According to Redfin’s “Homebuyer Demand Index” — it measures house tours — foot traffic ticked up marginally during the first week of the year, but as Dana Anderson noted, pending home sales are nevertheless down and it’s no secret why: “Daily average mortgage rates hit a seven-month high,” she wrote.
About the most you can say for the US housing market at this point is that the crisis at least isn’t getting worse: The share of the median household income needed to afford the “typical” American home actually slipped in 2024 to 41.8%. As the figure below makes clear, that’s where the good news stops, though.
Homes were more affordable in 2024 only by reference to 2023, when they were the least affordable on record.
“For many Americans, buying a home remains more out of reach than ever,” Redfin senior economist Elijah de la Campa said. “And that’s unlikely to change anytime soon.”
