U.S. mortgage rates rose to the highest levels nearly fourteen years last week, an industry lobby group said Wednesday,
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $647,200 rose 33 basis point to 5.98% for the week ending on June 17, a move that takes that headline rate to the highest level since the nation's housing bubble burst in November of 2008.
The MBA's seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single-family home, rose 7.9% as buyers rushed to complete transactions at locked-in rates, while new applications were up 4.2%.
The MBA said its refinancing index slumped 3.1% as homeowners backed away from accessing higher rates following last week's 75 basis point increase from the Federal Reserve.
Freddie Mac, the biggest individual mortgage loan buyer in the country, said last week that 30-year fixed mortgage rates surged to 5.78%, a half-point increase from last week and the biggest increase since 1987 and the highest since November of 2008.
The higher rates are already having an impact on house prices, as well, which fell by a seasonally-adjusted 0.7% last month, according to data from the National Association of Realtors, which also showed existing home sales down 3.4% from April.
"The housing market is cooling after running red hot in 2020 and 2021," said Bill Adams, chief economist at Dallas-based Comerica Bank. "Fundamental demand for housing is higher than pre-pandemic because of the rise of remote work and changes in lifestyles, but tighter monetary policy is a big headwind to the housing market."
"Sales of higher priced homes are holding up, but sales of homes under $500,000 are falling as higher interest rates price more buyers out of the market," he added. "Higher income and wealth households have been less sensitive to the rise in rates so far, cushioning sales at the high end, but this segment will likely soften too with stocks in a bear market."
May housing starts fell 14.4% to an annual rate of 1.549 million, the Commerce Department reported last week, well shy of the Street consensus forecast of 1.701 million and the lowest in more than two years.
Permits for new construction were also down 7% to a weaker-than-expected pace of 1.695 million.
"The supply of finished homes -- the inventory of finished homes that are for sale is incredibly low --historically low," Fed Chairman Jerome Powell told reporters in Washington yesterday, adding he and his colleagues are watching home prices "very carefully".
"I would say if you’re a home buyer, you need a bit of a reset. We need to get back to a place where supply and demand are back together, and where inflation is down low again, and mortgages are low again."