Residential mortgage rates barely budged in June, leveling off at the 6.5% mark the last week of May. Just when buyers were starting to exhale, thinking this may be as high as we go, the national 30-year average fixed-rate mortgage blew past that mark the first week of July. Talk about fireworks. According to Freddie Mac, rates finished the week ending July 6 at an average of 6.81%. One outlier from the Mortgage News Daily reported a 30-year fixed mortgage hit 7.22%.
If you’re thinking well, that’s not too bad, consider the poor buyer who is looking at a $400,000 mortgage and now faces an increase in monthly carrying charges over $100. This could be the breaking point for some buyers as far as qualifying.
And we’re not done yet. Housing market watchers expect mortgage rates to remain elevated amid ongoing economic uncertainty and the Federal Reserve’s rate hike war on inflation. The expectation is two more rate increases before the end of 2023. If they proceed with quarter-point increases, you do the math.
The Federal Reserve has clearly stated there is a long way to go to bring inflation back to its 2% goal. Since July 26 is their next meeting, we won’t have long to wait for an answer. Housing experts like Lawrence Yun, chief economist at the National Association of Realtors, feel the Fed has been hawkish as it regards rate increases. Yun says, “The rate hikes from earlier months have yet to exert their force at a time when inflation has already decelerated to 4% and there is no need to consider raising interest rates.” We’ll see if anyone in Washington listens to him.
Further, if you think housing inventory is down now, wait till these higher rates kick in. Sellers with mortgage rates below 3% or 4% are not motivated to sell no matter how much they want that extra bedroom or water view. Homeowners feel locked in and are remaining on the sidelines willing to wait it out. They may have a long wait.
No matter how high the rates go, however, keep in mind the real estate market has survived rates higher than we will probably be looking at by the end of the year and people were still buying houses. Eventually, buyers and sellers will have to blink and start the market rolling again.
Before I end this column, I would like to acknowledge the passing of Pat Copeland, an Island treasure and the editor of this column for The Sun for many years. She edited with a light touch, never passing judgment, simply suggesting a more concise sentence structure or precise word, and she was always right.
I was away when she passed, but was thankfully home in time to attend her memorial at Roser Church on Pine Avenue. Her family did her proud, from her young grandchildren to her well-poised and talented daughters and sons-in-law and, of course, her husband of 50 years, Doug Copeland, an Island treasure in his own right. It was an uplifting event with big smiles from all who attended, ending with a New Orleans-style second-line processional to celebrate a life well lived by a special lady.
You may not be able to influence how mortgage rates are moving, but you can keep your life moving in the right direction. In the words of Pat Copeland, “Life is a party.” Who cares what the Federal Reserve says?
