Mortgage Rates Retreat After Weeks of Steep Jumps

Freddie Mac Mortgage Rates – June 30, 2022

What Happened to Mortgage Rates This Week:

The Freddie Mac fixed rate for a 30-year loan took a breather in the wake of a three-week 72-basis point ascent, declining to 5.70% this week, mirroring the pullback in the 10-year Treasury. With the drumbeat of a possible recession growing louder, investors have been seeking safer assets, driving bond yields lower again this week. Rising prices are eating into consumers’ paychecks, leaving many Americans with less money for discretionary spending. In addition, with inflation outpacing pay raises, most workers are seeing their income fall behind, further straining the finances of buyers who are also facing higher borrowing costs.

What it Means:

At the midpoint of 2022, housing markets are clearly headed for a reset, as rising supply is blending with cooling demand. The number of homeowners listing their homes for sale has been growing for two straight months compared to a year ago, bringing more options for homebuyers to choose from. The median home price hit a new record in June, reaching $450,000, a 17% gain from last year. At that price, combined with today’s fixed rate for a 30-year loan, homebuyers are looking at a monthly payment of about $2,100—before adding in taxes, insurance or fees—more than $790 higher than June of 2021.

Not surprisingly, this is taking a toll on transactions, and as properties sit on the market longer, the share of those with price reductions is rising. Looking at the next few months, I expect to see further moderation in transactions, followed by a sharper slowdown in price growth. Buyers and sellers will find themselves on more equal footing, a welcome shift after two years of a severely lopsided market during the pandemic.

George RatiuGeorge Ratiu

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