Mortgage rates continue to escalate, moving closer to 6%. According to Freddie Mac, the 30-year fixed mortgage rate rose to 5.89%, surpassing their recent high in mid-June. As a result, the monthly mortgage payment is about 60% higher compared to last year. While borrowing costs have increased faster than people’s wages, buyers currently need to spend 10% more of their budget for their mortgage payment if they want to buy the median-priced home.
These higher mortgage rates have already impacted activity in the housing market. After looking at the actual – not seasonally adjusted – number of home sales, while June is typically the busiest month of the year in the real estate market, home sales generally drop in July by about 6 percentage points compared to June. However, data shows that higher mortgage rates pushed home sales activity down even further in July by 14 percentage points to a level below the historical average. Nevertheless, home prices continue to rise as inventory remains tight.