Mortgages Hit Highest Level in 20 Years

HOUSTON – (Realty News Report) – The 30- year fixed-rate mortgage has reached 7.09 percent, its highest level in over 20 years, Freddie Mac reported Thursday.

“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s Chief Economist. “The last time the 30-year fixed-rate mortgage exceeded 7 percent was last November. Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales.”

Houston’s single-family home sales fell 8.5 percent last month as 7,557 units sold were sold in July compared to 8,256 in July 2022, the Houston Association of Realtors reported.

The housing market in Houston and around the nation boomed in the Covid years as low mortgage rates motivated buyers.

Homes flew off the shelves as 30-year mortgage fell, even dipping below 3 percent. But in March of 2022 the Federal Reserve began a series of brutal rate hikes to head off inflation, after spending a year dismissing rising consumer prices as short-term “transitory” inflation that would soon pass. Inflation continued to soar.

In November of 2020, the 30-year fixed rate mortgage averaged 2.78 percent, according to Freddie Mac.

Then the Federal Reserve began an onslaught of rate hikes, as high as 75 basis points, and residential sales began to fall as mortgage rates increased. Affordability suffered.

On Thursday, Freddie Mac said the 30-year fixed-rate mortgage averaged 7.09 percent as of August 17, 2023, up from last week when it averaged 6.96 percent. A year ago at this time, the 30-year mortgage averaged 5.13 percent.

Would-be home buyers are discouraged from pursuing a home purchase with the exorbitant rates.

“Mortgage application activity continued to decline last week as mortgage rates reached their highest levels since last October,” Bob Broeksmit, president of the Mortgage Bankers Association. “These higher rates continue to keep many prospective buyers on the sidelines. On the bright side, we have seen a slight uptick in government purchase applications as well demand for ARM products, which could indicate that some buyers remain active in their homebuying search despite higher rates.”

Today’s housing market represents a return to normalcy, said Cathy Treviño, chair of the Houston Association of Realtors.

“What we are seeing is a market that is beginning to become more normalized. We are going back to pre-pandemic numbers,” Treviño said on The Ralph Bivins Project podcast. “And when you really look at that, you see that we are actually surpassing the record-breaking years of 2018 and 2019.The market is actually thriving well right now and we are very optimistic that it will continue. You know, everyone has been concerned about interest rates and what is happening with the economy, the high inflation rates and all those things. But the good thing about all of this is the fact that we are getting an opportunity to go back and level off our market. The past two years with COVID was a hyper-market.”