Mortgage rates in the United States climbed to the highest level in more than two decades this week, making it more and more difficult for would-be homebuyers to afford a house. According to Freddie Mac, the average rate for a 30-year fixed mortgage increased to 7.09 percent in the week ended August 17, the highest it’s been since April 2002.
Along with the Fed’s aggressive rate hikes, mortgage rates have climbed by almost 4 percentage points since the beginning of 2022, threatening to push more and more potential buyers out of the market, especially as high rents and other costs of living make it increasingly difficult to save for a significant down payment.
Making things even more difficult, high mortgage rates don’t just affect the demand side of the market. Supply is also constrained as prospective sellers stay put to avoid taking out a new mortgage at a much higher rate than their current one. This in turn has kept home prices elevated, or at least kept them from fully reflecting the significantly higher mortgage rates compared to two years ago.
There is still hope for some relief for homebuyers, however, as the housing market typically cools off in the fall. “As we look to the upcoming autumn season, which is typically the best time to buy a home, a glimmer of optimism emerges,” notes Sabrina Speianu, economic data manager at Realtor.com. “It does appear that more newly listed homes could be available than the record low set last fall and winter if the current trend of a narrowing gap continues. However, it is still important to note that the supply of newly listed homes and the overall inventory available for sale are anticipated to remain constrained.”
