The U.S. average interest rate on a fixed-rate, 30-year mortgage reached 7.08 percent during the week ended 28 October, according to the Federal Home Loan Mortgage Corporation (Freddie Mac).

As August ended, the rate was close to 6 percent; it averaged 3.17 percent when this year began.

Some lenders had lifted rates above 7 percent earlier; this is the first time Freddie Mac found a national average rate above that benchmark.

Buyers making a 20-percent down payment on a median-price home would make an average mortgage payment of $2,300 a month, according to, compared to $1,300 a year ago.

The higher rates have torpedoed the market for new homes, as we report in “Sales of New Homes Fell 10.9 Percent in September” in this issue.

“Many potential buyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward,” Sam Khater, Freddie Mac’s chief economist, said in a statement announcing the increased average rate.

Also in September, sales of existing homes dove 24 percent, according to the National Association of Realtors, extending the slide into an eighth consecutive month.

The national median mortgage payment in September was $1,931, 5.5 percent more than in August, the Mortgage Bankers Association said, an increase of 40 percent, or an average of $558, since the year began.

The median mortgage loan amount in September dipped to $305,500, a slight dip from February’s record of $340,000, which was the highest since at least July 2009.

Requests for rate locks on mortgage applications for home purchases were 30 percent fewer in September than a year previous; rate locks on refinancing applications plummeted by 93 percent, data firm Black Knight reported.

The steady climb in interest rates has slowed the rise in the median home price, which grew at an annual rate of 13 percent in September, compared to 15.5 percent in August, the S&P CoreLogic Case-Shiller Home Price Index reported.

That drop of 2.6 percentage points is the largest single month-to-month drop since the index was created in 1987, it noted.

“The growth rate of housing prices peaked in spring 2022 and has been declining ever since,” managing director Craig Lazarra at S&P Dow Jones Indices said to The Wall Street Journal.

“All of my listings are just sitting on the market,” Redfin agent Alison Williams told the WSJ. “They are well over 30 days on the market. Six months ago, four days on the market would have been a long time.”

Buyers who do buy houses increasingly are turning to adjustable rate mortgages (ARMs), the WSJ reported.

ARMs allow buyers to take a loan with an interest rate that the lender can hike at specific times in the future. ARMs were a central cause of the 2007 housing market crash that ushered in the Great Recession.

TREND FORECAST:  Like a law of physics, home sales fall as the U.S. Federal Reserve raises interest rates.

The housing market for modest- and middle-income buyers has been in a recession for a year, with those income groups making up a smaller and smaller proportion of home buyers, as we have documented in “Home Prices Up, Incomes Down” (16 Nov 2021), “The Homes Sales Slip” (22 Mar 2022) and “Pace of April Existing Home Sales Slowest in Two Years” (24 May 2022), among other stories.

Because the Fed has more rate increases on deck, home sales will continue to decline overall as the housing market maintains its dual personality: cash-rich and high-earning buyers will have their pick of homes for sale, while the majority of people will hunker down where they are.

The combination of high home prices, rising interest rates, premium rents, and a slowing economy will extend a trend we have been warning about for more than a year: younger buyers and those lacking high incomes or a cash hoard will have an increasingly difficult time saving for a down payment on a house and an equally difficult time qualifying for an affordable mortgage.

At least one generation of Americans will spend their lives as renters, denied the satisfaction—and potential financial rewards—of owning a home of their own.

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