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Interest rates on 30-year, fixed-rate mortgages averaged 5.11 percent during the week ending 21 April, compared to 5.0 percent a week earlier, according to the Federal Home Loan Mortgage Corporation (Freddie Mac).
Rates notched their seventh consecutive week of increases, reaching their highest since April 2010, which saw an average rate of 5.21 percent, Freddie Mac said.
Higher rates are pushing some people out of the market, as we report in “Home Prices Set Yet Another Record While Sales Fall” in this issue.
“It continues to be a seller’s market but buyers who remain interested may find that competition has moderately softened,” Freddie Mac chief economist Sam Khater said in a public statement.
Mortgage rates tend to track the yield on the 10-year treasury note, which surpassed 2.8 percent last week.
Rates are likely to keep rising, as the U.S. Federal Reserve is expected to raise its key interest rate by a half-point at its meeting next month.
The Fed also is likely to raise rates by the same amount in July and September, many analysts say, while some expect the central bank to boost its rate by three-quarters of a point in at least one of those meetings.
“The Fed’s intent of cooling demand [in the housing market] seems to be working, leading housing markets toward a much-needed balance,” George Ratiu, Realtor.com’s chief of economic research, told CNN.
TREND FORECAST: Although demand is cooling, prices will not decline significantly without a major shock to the U.S. economy.
We have long predicted that a shock will come to the housing market when the U.S. Federal Reserve raises its key interest rate to, or beyond, 1.5 percent.
Even then, first-time and modest-income buyers will not find it much easier to enter the market. A Fed rate of 1.5 percent is likely to slow many markets, crimp business activity, and raise unemployment.