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Oops, mortgage rates did it again. After playing with your heart in September — briefly flirting below 6% — they’ve gone up five weeks in a row.
The 30-year fixed-rate mortgage averaged 6.6% in the week ending Oct. 24, an increase of 14 basis points over the previous week. A basis point is one one-hundredth of a percentage point.
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A long climb
Rates have climbed unceasingly in the five weeks since Sept. 19, when the 30-year mortgage averaged 5.89%. Have mortgage rates lost all their senses? No, they’ve been so typically themselves, falling when it looks as if the economy is slowing, and rising when the economy seems to be revving up:
Mortgage rates fell in September because investors knew that the Federal Reserve was about to cut short-term interest rates. There were “concerns about potentially weakening in the labor market,” said Lisa Sturtevant, chief economist for Bright MLS, a multiple listing service in the mid-Atlantic region.
But mortgage rates turned upward and then got lost in the game in early October, rising nonstop after the September employment report was released. That report showed better-than-expected job creation. There’s a risk that strong job growth could push wages higher as employers compete for workers, which in turn could stall progress on taming inflation. That possibility is pushing rates higher.
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Lower than a year ago
Housing economists are quick to remind prospective borrowers that mortgage rates have made a lot of progress. A year ago this week, the 30-year mortgage averaged 7.95%. It has fallen 1.35 percentage points since then.
“Even though rates have been on a recent upswing, they are over a full percentage point lower than a year ago, which has kept some home buyers in the market,” said Joel Kan, the Mortgage Bankers Association’s deputy chief economist, in a statement.
But the housing market is not that innocent: Lower mortgage rates are undermined by higher prices, taking some would-be buyers out of the market. The median sales price of an existing home was $404,500 in September, according to the National Association of Realtors. That’s 3% higher than a year earlier, when the median house cost less than $400,000.
First-time home buyers in September accounted for 26% of sales, which is on the low side, says Lawrence Yun, chief economist for NAR. “First-time buyers continue to struggle in the current environment.”
Yun holds out hope that September’s rate dip will end up lifting sales. “We know that the homebuying process is not a snap decision,” he says. “It’s a long process of searching for homes, signing the contract and going to the closing table. So it takes several months.”
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