“For Sale” sign outside a home in Albany, California, May 31, 2022.
David Paul Morris | Bloomberg | Getty Images
Mortgage rates jumped on Friday after the government’s monthly report on wholesale prices showed inflation remains persistent and hotter than most analysts expected.
The average interest rate on a 30-year fixed mortgage rose to 7.14%, according to Mortgage News Daily. It was the highest level in two months.
Mortgage rates hit their last high in October, then fell sharply over the next two months and were flat at about 6.6% in December. It rose more than 7% last Friday after another government report on consumer prices came in better than expected.
“There are two ways to look at recent interest rate trends given the spike based on the past two weeks of data,” said Matthew Graham, chief operating officer at Mortgage News Daily. “On the one hand, there is solace in the fact that interest rates are still almost 1 percentage point lower than in October. On the other hand, optimism about lower interest rates in 2024 has suddenly been replaced by skepticism. ”
Lower interest rates late last year sparked optimism in the housing market as rising home prices combined to deter buyers in the fall. New home sales jumped 8% in December, driven largely by lower interest rates, according to the U.S. Census Bureau.
Homebuilder sentiment, based on the National Association of Home Builders index, has risen over the past three months as builders report lower interest rates are driving an influx of buyers into their model homes. There is. Builders said in a February report that they expect mortgage rates to continue to ease in the coming months.
“Buyer traffic has improved because even a small drop in interest rates generates a disproportionately positive response among prospective homebuyers,” said Alicia Huey, president of NAHB, a home builder and developer in Birmingham, Alabama. “I am doing so,” he said. She said: “Mortgage rates remain too high for many prospective buyers, but if mortgage rates continue to fall this year, pent-up demand is expected to bring more buyers into the market.”
Demand is strong despite high home prices and a very low supply of homes for sale. In addition, President’s Day weekend is considered the unofficial start of the all-important spring housing market.
However, this new rise in interest rates may deter buyers. According to Redfin, a national real estate brokerage, the number of contracts for both existing homes and new properties slumped in January, when interest rates fell to flat.
Don’t miss the next story from CNBC PRO.
