For a while, it seemed as though mortgage rates traveled to the back of everyone’s mind. They’d fallen below 7%, and something about a mortgage rate that begins with a six appealed to people, even though it was still more than double pandemic-era rates.
But for the first time all year, last week, mortgage rates surpassed 7%. And today, Freddie Mac’s weekly reading showed the 30-year fixed rate mortgage just hit 7.17%. (Daily mortgage rates are trending higher: 7.52%, as of the latest reading). But as you can see, they’ve reemerged at the forefront of the housing conversation on the back of sticky inflation and interest rates cuts that are further away—and as we know, mortgage rates are somewhat of a game changer in the housing world.
“Mortgage rates continue to be a wild card, and although they topped 7% for the first time in 2024 last week, they are in territory that was charted last fall when rates approached 8%,” Realtor.com’s chief economist, Danielle Hale, wrote in a weekly housing market report.
Whether that means mortgage rates will top 8% again or not, we’re close to that more than two-decade high seen in October last year. The effect of that could be felt soon, if not already. “So far, sellers continue to put homes on the market more frequently than last year, but mortgage rates could cause a pullback in this figure as nearly three-quarters of potential sellers are also trying to buy a home,” Hale wrote.
By Realtor.com’s weekly measure, new listings are up from a year earlier, and so is active inventory. But according to Redfin’s monthly update, new listings slowed in March, dropping 6% on a monthly basis, which happens to be the largest decline in about two years. They are higher than last year, but rose at a much slower pace compared to Febuary’s 14% annual gain. Active listings rose 1% in March from the previous month, the smallest increase since the end of summer.
“New listings may have slowed because mortgage rates are staying higher longer than expected, which is exacerbating the lock-in effect,” Redfin’s data journalist, Lily Katz, wrote. “The average 30-year-fixed mortgage rate in March was 6.82%—the highest since December—and the Federal Reserve has warned that elevated inflation will probably delay the interest-rate cuts they had been planning this year.”
Fed Chair Jerome Powell pretty much confirmed that theory last week when he said more time was needed for restrictive policy to work and that the Fed would leave interest rates where they are for as long as necessary to tame inflation.
Existing home sales fell in March too: 4.3% on a monthly basis and 3.7% on an annual basis. “Home sales are stuck because interest rates have not made any major moves,” National Association of Realtors’ chief economist, Lawrence Yun, said in the release. Although pending home sales jumped in March.
Still, it’s starting to seem like mortgage rates in the 7% range for the year are becoming more and more likely. Earlier this week, Carl Riccadonna, chief U.S. economist at BNP Paribas, said: “A new reality is setting in with homebuyers that we’re not going to go back to those pandemic lows anytime soon, given the very soft landing in the economy, persistent inflation pressures, which are trending lower but taking some time to move there—and that means elevated mortgage rates with a seven as the first number as opposed to two during the pandemic.”
Others, however, see them falling a bit further. Lisa Sturtevant, chief economist at Bright MLS, recently said, “we are likely to see rates close to 7% throughout the spring, and in the mid-to-high-6s into the summer,” in a statement. Capital Economics reaffirmed its mortgage rate outlook (despite the fact that it changed its interest rate forecast) in an analysis published today: “We still expect mortgage rates to come down from 7.2% to 6.5% by the end of this year,” the firm’s property economist, Thomas Ryan, wrote.
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