The most popular US mortgage now costs Americans more than it has in 21 years as rates top 7%
- The US 30-year fixed mortgage hit 7.16% in the week ending October 21, Mortgage Bankers Association data showed Wednesday.
- It's the first time the rate has topped 7% since 2001.
Rates for the most popular US mortgage product just hit the highest mark since 2001, according to Wednesday data from the Mortgage Bankers Association.
Contracts for a 30-year fixed mortgage climbed 22 basis points to 7.16% in the week leading up to October 21. At the same time, the industry group said applications for purchasing or refinancing dropped to their lowest level since 1997, as the gauge notched its 10th decline in 11 weeks.
The Federal Reserve's aggressive interest rate hikes are expected to continue in the November meeting, with traders betting on another 75 basis point hike. The housing market is particularly sensitive to the central bank's policy adjustments, and the sector has stumbled through 2022 as mortgage rates have more than doubled since the start of the year on the back of the Fed's maneuvering to tame inflation.
On Tuesday, data from the S&P CoreLogic Case-Shiller Index revealed that prices across 20 US cities fell 1.3% in August on a month-over-month basis. It's the steepest drop since March 2009, and another data point illustrating the US housing market's slowdown.
Between climbing mortgage rates and a still-tight home inventory, a housing correction is already underway, according to Comerica's chief economist Bill Adams.
In a Tuesday note, he forecasted that real residential investment will slide 18% and sales of new single-family homes will crash 25% in 2023. All this, Adams predicted, comes as the Fed effectively forces the housing market into a sharp downturn, which will drag on the broader economy.
Consumer confidence, too, continues to decline as Fed rate hikes, stubborn inflation, and a looming recession weigh on Americans' outlook.
"With fewer Americans moving, sales of household durable goods will also slow, a further headwind to the economy," Adams wrote.
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