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.
Nvidia on Wednesday became the first public company to reach a market capitalization of $5 trillion. The ravenous appetite for the Silicon Valley company’s chips is the main reason that the company’s stock price has increased so rapidly since early 2023.
Chris Williamson, Chief Business Economist at S&P Global, breaks down September’s CPI print and inflation trends, explaining what it means for markets.
A big-screen adaptation of the anime “Chainsaw Man” has topped the North American box office, beating a Springsteen biopic and “Black Phone 2.” The movie earned $17.25 million in the U.S. and Canada this weekend. “Black Phone 2” fell to second place with $13 million. Two new releases, the rom-com “Regretting You” and “Springsteen — Deliver Me From Nowhere,” earned $12.85 million and $9.1 million, respectively. “Chainsaw Man – The Movie: Reze Arc” is based on the manga series about a demon hunter. It's another win for Sony-owned Crunchyroll, which also released a “Demon Slayer” film last month that debuted to a record $70 million.
The Federal Aviation Administration says flights departing for Los Angeles International Airport were halted briefly due to a staffing shortage at a Southern California air traffic facility. The FAA issued a temporary ground stop at one of the world’s busiest airports on Sunday morning soon after U.S. Transportation Secretary Sean Duffy predicted that travelers would see more flights delayed as the nation’s air traffic controllers work without pay during the federal government shutdown. The hold on planes taking off for LAX lasted an hour and 45 minutes and didn't appear to cause continued problems. The FAA said staffing shortages also delayed planes headed to Washington, Chicago and Newark, New Jersey on Sunday.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
