Rising mortgage rates dampen home sales
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Annelise Capossela/Axios
Warning bells about a slowdown in the white-hot housing market are ringing louder thanks to an uptick in mortgage rates and new weakness in pending home sales.
Why it matters: Mortgage rates plummeted in 2020 as the economy buckled under the pressure of the coronavirus pandemic. Now that trend is reversing, putting a damper on consumer appetite for homebuying.
What's happening: The rate on a 30-year fixed mortgage rose to 2.97%, which is its highest level since August 2020, according to Freddie Mac's weekly survey released Thursday.
- Nationally, pending home sales fell 2.8% in January, well below the consensus forecast for no change. The metric, however, was 13% higher than a year ago.
- Consumer confidence overall edged higher in February, but those living in big cities and rural areas are less optimistic about buying or selling their homes because of rising prices, according to the recent BofA US consumer confidence indicator.
What they're saying: "The housing sector is always sensitive to changes in mortgage rates so the latest data is showing a loss in momentum for overall housing,” Lawrence Yun, NAR's chief economist, tells Axios.
- Home sales will continue to rise modestly but gains are likely to now be in the single digits versus the 20% upticks seen in late 2020, Yun says.
- "Consumers need to understand the absolute low rates in mortgages — those days are over.”
Yes, but: Investors are also factoring in Fed chair Jerome Powell's comments this week emphasizing that the Fed is unlikely to tighten monetary policy solely in response to a stronger labor market, Danielle Hale, realtor.com chief economist, noted in a statement.
- This may stem some of the upward pressure on interest rates in the upcoming weeks, she added.
