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U.S. mortgage rates rose last week for the third consecutive week to their highest since March 2020 when the COVID War began, The Wall Street Journal reported.
The average rate for a 30-year, fixed-rate loan moved up to 3.45 percent on 13 January, compared to 3.22 percent the week before and 2.79 percent a year earlier, according to the Federal Home Loan Mortgage Corp (Freddie Mac).
Strong demand for homes drove the median sale price to $353,900 in November, up 13.9 percent in a year, according to the National Association of Realtors. The median December price jumped to $382,900, the online brokerage Redfin said (see related story in this issue).
“Given the fast pace of home price growth, [higher rates] will likely dampen demand in the near future,” Freddie Mac’s chief economist Sam Khater told the WSJ.
Mortgage payments as a proportion of income have become less affordable than at any time since 2008 at the beginning of the Great Recession, according to a report by the Federal Reserve Bank of Atlanta.
A year ago, Americans were devoting about 29 percent of household income to mortgage payments on a median-priced home; in October, the figure was 33 percent, the bank reported.
TREND FORECAST: We maintain our long-standing forecast that when the U.S. Federal Reserve raises interest rates to, and then beyond, 1.5 percent, housing sales will contract sharply.
While real estate values will fall, minus a wild card event, we do not anticipate a real estate collapse.
However, on the commercial real estate front, with a sizable percentage of people disgusted with wasting much of their life commuting and demanding to work-at-home full or part time, this will put increasing downward pressure on the commercial real estate sector, particularly in the office occupancy sectors.