The housing market is feeling the squeeze from higher interest rates.
The average 30-year fixed mortgage rate jumped 23 basis points from last week to 6.62 percent, the highest rate since November 2022, according to the Mortgage Bankers Association (MBA). This is leading to a drop-off in mortgage applications at a time when home buying is usually picking up.
"The jump led to the purchase applications index decreasing 18 percent to its lowest level since 1995,” according to Joel Kan, MBA vice president and deputy chief economist. “This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected."
Mortgage rates rose rapidly in 2022 as the Federal Reserve increased its benchmark interest rate with the goal of bringing down inflation across the economy, including the overheated housing market. On that front, the economy has made some progress.
The National Association of Realtors on Tuesday reported that the median existing home price ticked up 1.3 percent in January from the year before, which is the smallest gain since 2012. The slowing inflation tracked with a 0.7 percent drop in existing home sales, which is the biggest drop since 2010.
“Home sales are bottoming out,” said NAR Chief Economist Lawrence Yun in a press release. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”
There was some moderation in mortgage rates in recent months, as the market anticipated the Fed easing up on rate hikes. However, a slew of recent data reports showing a surprisingly strong U.S. economy have tempered hopes of fewer rate hikes.
The whole point of raising rates, according to Fed officials, is to bring down inflation. For now, though, the combination of higher rates and still historically high prices is pushing many homebuyers out of the market.
"The increase in mortgage rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates," said Kan.
An analyst at JP Morgan is predicting massive future growth for Apple in its music and gaming divisions — to the tune of more than $8 billion in revenue by 2025. Cheddar News anchors Kristen Scholer and Hena Doba discuss the glowing forecast for the tech giant.
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Amy Leschke-Kahle, Vice President of Performance Acceleration at The Marcus Buckingham Company, an ADP company, joins Cheddar to discuss how encouraging employee engagement and empowering employee voices can benefit every workplace and busts a myth about employee engagement while working from home.
Jim Huether, CEO of Hyperice, joins Cheddar to discuss Hyperice's new employee mental health initiative, known as the Workplace Alliance, with 100-plus companies to combat the ongoing mental health crisis and how they're taking a hands-on, data-driven approach to the mental health crisis.
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Catching you up on the stories you need to know this morning, the U.S. could soon get its first major gun safety law in years, the House Select Committee investigating the January 6th attack on the U.S. capitol holds its second hearing, and today might just be the day the Supreme Court overturns Roe v. Wade, and decides on new gun laws.
