Mortgage rates in the United States have surged to their highest point since 2002, according to a report from a prominent home loan finance company on Thursday (August 17). This development adds further strain to buyers already grappling with the challenge of elevated costs and limited housing inventory. The well-liked 30-year fixed-rate mortgage has now reached 7.09 percent this week, a figure stated by Freddie Mac in an official statement. This rate last exceeded the seven percent threshold back in November 2022.
The housing market has been significantly impacted by the rapid escalation of interest rates in recent months, causing homeowners to hesitate putting their properties up for sale. Many had secured lower rates on their mortgages previously. Economist Oren Klachkin from Oxford Economics emphasized that the current rate hike will exacerbate the difficulties potential homebuyers face in affording new homes. He stated that affordability is rapidly diminishing due to the combination of high rates and tightened credit flow, leading to an acute scarcity of available properties.
Comparatively, a year ago, the 30-year rate stood at 5.13 percent, while it was below three percent in late 2020. This new figure of 7.09 percent is the highest recorded since April 2002, based on data from Freddie Mac. Klachkin highlighted that the escalating rates discourage homeowners from listing their properties, as it would necessitate moving from a mortgage with an interest rate below four percent to a new one. This transition could potentially double monthly payments if rates were to reach eight percent.
June witnessed a notable decline in sales of existing homes, dropping to the slowest pace since January. Simultaneously, the median sales price reached the second-highest level on record, as indicated by data from the National Association of Realtors (NAR). The NAR further noted that a substantial third of homes were sold above their list prices during that month. The scarcity of existing homes available for purchase has compelled buyers to enter the market for new properties, further intensifying the demand-supply imbalance.
