Borrowing costs, which are rising toward 7% again, are putting a damper on the housing market.
People talking at table with calculator and house model
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Recent swings in mortgage rates are helping to drag down contract signings, which fell 5% in January, the National Association of REALTORS® reported this week. Pending home sales, a forward-looking indicator of housing activity based on contract signings, were down 8.8% compared to a year earlier.

“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” says NAR Chief Economist Lawrence Yun. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales.”

NAR January 2024 Pending Home Sales

In recent weeks, mortgage rates have started creeping back toward 7%. Freddie Mac reports the 30-year fixed-rate mortgage averaged 6.94% this week, marking a two-month high. “While this is still below the rates seen in the fall of 2023, it impacts home buyers’ excitement about entering a spring market,” says NAR Deputy Chief Economist Jessica Lautz. The monthly mortgage payment for a $400,000 home, assuming a 20% down payment, now translates to about $2,116, Lautz adds. “For first-time buyers who are the most price-sensitive, the rise in mortgage rates poses a cause for concern, as they may be priced out of the market.”

Indeed, “the recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for home buying,” adds Sam Khater, Freddie Mac’s chief economist. “While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential home buyers on the sidelines.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Feb. 29:

  • 30-year fixed-rate mortgages: averaged 6.94%, rising from last week’s 6.9% average. A year ago, 30-year rates averaged 6.65%.
  • 15-year fixed-rate mortgages: averaged 6.26%, dropping slightly from last week’s 6.29% average. Last year at this time, 15-year rates averaged 5.89%.