Home Loan Interest Rates Keep Increasing

For the fourth consecutive week, mortgage rates continued to climb as home buyers face higher borrowing costs. But, mortgage applications for home purchases have managed to increase.

“Mortgage rates are drifting upwards again and represent continued affordability challenges for prospective buyers—especially first-time buyers,” says Sam Khater, Freddie Mac’s chief economist. “Borrowing costs are moving right now for three main reasons: the very strong economy, higher U.S. government debt issuances, and global trade tensions.”

Freddie Mac reports the following national averages for the week ending Sept. 20:

  • 30-year fixed-rate mortgages averaged 4.65 percent, with an average 0.5 point, rising from last week’s 4.6 percent average. Last year at this time, 30-year rates averaged 3.83 percent.
  • 15-year fixed-rate mortgages averaged 4.11 percent, with an average 0.5 point, increasing from last week’s 4.06 percent average. A year ago, 15-year rates averaged 3.13 percent.
Source: Freddie Mac

Labor Shortages Push Up Construction Costs

Builders are being forced to raise home prices and are having a more difficult time meeting project deadlines because of the ongoing labor shortage in the construction industry, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. Eighty-four percent of builders say they have had to pay higher wages to subcontractor bids, 83 percent say they have had to raise home prices, and 73 percent say they can’t complete projects on time without more manpower. The number of builders reporting labor and subcontractor shortages reached a record high in July.

“The steepest upward trend has been in the share of builders saying the labor/subcontractor shortages are causing higher home prices, which increased by 22 percentage points between 2015 and 2018—to the point where it is now nearly tied with higher wages/sub bids as the most widespread effect of the shortages,” NAHB reports on its Eye on Housing blog. The survey also shows other effects of the labor shortage, such as builders saying that, in some cases, they’ve been forced to turn down projects.

Source: “Housing Market Index (HMI),” National Association of Home Builders/Eye on Housing (September 2018)

Home Loan Interest Rates Inch Up

Mortgage rates rose slightly for the second consecutive week, and economists warn that more rises are likely to come. Mortgage rates are now up three-quarters of a percentage point from last year.

“Borrowing costs may be slowly on the rise again in coming weeks, as investors remain optimistic about the underlying strength of the economy,” says Sam Khater, Freddie Mac’s chief economist. Home prices have been rising too—although at a slower pace recently—but are still “outrunning rising inflation and incomes,” Khater notes. “The weakening in affordability is hindering many interested buyers this fall, even as the robust economy brings them into the market.”

Freddie Mac reports the following averages for the week ending Sept. 6:

  • 30-year fixed-rate mortgages: averaged 4.54 percent, with an average 0.5 point for the week, increasing from last week’s 4.52 percent average. Last year at this time, 30-year rates averaged 3.78 percent.
  • 15-year fixed-rate mortgages: averaged 3.99 percent, with an average 0.4 point, increasing from last week’s 3.97 percent average. A year ago, 15-year rates averaged 3.08 percent.
Source: Freddie Mac

Mortgage Interest Rates ‘Mostly Holding Steady’

Mortgage rates haven’t been this stable since the fall of 2016. Rates did inch up this week, but only slightly and are still offering prospective buyers a window of opportunity, says Sam Khater, Freddie Mac’s chief economist.

The recent slowdown in price appreciation in several markets, mixed with these steady mortgage rates, is “good news” for many prospective buyers who may have been priced out earlier this year. “Given the strength of the economy, it is possible for home sales to pick up even more before year’s end,” Khater says. “The key factor will be if affordably priced inventory increases enough to continue this recent trend of cooling price appreciation.”

Freddie Mac reports the following national averages for the week ending Aug. 30:

  • 30-year fixed-rate mortgages: averaged 4.52 percent, with an average 0.5 point, rising from last week’s 4.51 percent average. Last year at this time, 30-year rates averaged 3.82 percent.
  • 15-year fixed-rate mortgages: averaged 3.97 percent, with an average 0.5 point, falling from last week’s 3.98 percent average. A year ago, 15-year rates averaged 3.12 percent.
Source: “Mortgage Rates Tick Up,” Freddie Mac (Aug. 30, 2018)

Home Loan Interest Rates ‘Continue to Decline’

Borrowers continued to get relief with mortgage rates this week, as the 30-year fixed-rate mortgage sank lower for the third consecutive week. Mortgage rates are now at their lowest level since April.

“Backed by very strong consumer spending, the economy is red-hot this month, which is in turn rippling through the financial markets and driving equities higher,” says Sam Khater, Freddie Mac’s chief economist. “It is clear affordability constraints” have cooled the housing market, particularly in expensive coastal markets. “Many metro areas desperately need more new and existing affordable inventory to break out of this slump,” he notes.

Freddie Mac reports the following national averages for the week ending Aug. 23:

  • 30-year fixed-rate mortgages: averaged 4.51 percent, with an average 0.5 point, falling from last week’s 4.53 percent average. Last year at this time, 30-year rates averaged 3.86 percent.
  • 15-year fixed-rate mortgages: averaged 3.98 percent, with an average 0.5 point, falling from last week’s 4.01 percent average. A year ago, 15-year rates averaged 3.16 percent.
Source: “Mortgage Rates Maintain Downward Trend,” Freddie Mac (Aug. 23, 2018)

 

Mortgage Rates Ease for Second Week

Borrowers had slightly more relief with mortgage rates again this week. The 30-year fixed-rate mortgage rate dipped again, averaging 4.53 percent, Freddie Mac reports.

“The stability in borrowing costs comes despite the highest core inflation rates since 2008 and turbulence in the currency markets,” says Sam Khater, Freddie Mac’s chief economist. “Unfortunately, this pause in rates is not leading to increasing home sales.”

Freddie Mac reports the following national averages for the week ending Aug. 16:

  • 30-year fixed-rate mortgages: averaged 4.53 percent, with an average 0.5 point, falling from last week’s 4.59 percent average. Last year at this time, 30-year rates averaged 3.89 percent.
  • 15-year fixed-rate mortgages: averaged 4.01 percent, with an average 0.5 point, dropping from last week’s 4.05 percent average. A year ago, 15-year rates averaged 3.16 percent.
Source: “Mortgage Rates Step Back,” Freddie Mac (Aug. 16, 2018)

Wildfires May Make Insurance Harder to Get in California

As firefighters work on the containment of at least 11 wildfires that continue to burn throughout the state, the California Department of Insurance is already warning homeowners about the insurance headaches they will likely face, even for those whose homes weren’t affected in the latest fires.

The increasing number and severity of wildfires will likely make it more difficult for homeowners in the state to find and hold onto insurance, the California Department of Insurance warns.

California Insurance Commissioner David Jones told the Associated Press that more insurance companies may choose not to renew policies, or may stop writing homeowners policies in areas with the highest fire risk. He also says homeowners in the state should be prepared to face rate increases. Also, some portions of the state may be reclassified from safe to high-risk for wildfires that could jump costs for homeowners.

Source: “California fires may make homeowners insurance harder to get,” Associated Press (Aug. 13, 2018)

Dip in Rates Provides ‘Stability’ for Home Sales

Borrowers saw a little relief from recent increases. Mortgage rates dropped slightly this week, with the 30-year fixed-rate mortgage averaging 4.59 percent, Freddie Mac reports. “This stability is much needed for home sales, which have crested because of the multiyear run up in prices, tight affordable inventory, and this year’s higher rates,” says Sam Khater, Freddie Mac’s chief economist.

Home prices are still climbing and rates are up from 3.90 percent a year ago. “Some prospective buyers are definitely feeling an affordability crunch,” Khater says.

Freddie Mac reports the following national averages for the week ending Aug. 9:

  • 30-year fixed-rate mortgages: averaged 4.59 percent, with an average 0.5 point, dropping from last week’s 4.60 percent average. Last year at this time, 30-year rates averaged 3.90 percent.
  • 15-year fixed-rate mortgages: averaged 4.05 percent, with an average 0.5 point, falling from last week’s 4.08 percent average. A year ago, 15-year rates averaged 3.18 percent.
Source: “Mortgage Rates Inch Backward,” Freddie Mac (Aug. 9, 2018)

New Program Aims to Cap Rent Hikes

Similar to the concept of rent control, Freddie Mac announced a new program to incentivize rental property owners to ease their continuous rent hikes. The mortgage giant is offering discounted financing to owners who agree to cap rent increases for the life of their loans. Owners who take part in the program must limit rent increases on 80 percent of their units. Owners also must agree to make at least 50 percent of their units affordable to those earning the local median income or less.

The program, now available across the country, is voluntary. Freddie Mac officials say they will check rents on an annual basis to make sure participating property owners are complying with the program’s rules. Those who are in violation will be assessed a penalty fee until they return rents to a level that Freddie deems compliant.

Source: “Freddie Mac to Lower Financing Costs for Landlords who Cap Rent Rises,” The Wall Street Journal (Aug. 7, 2018)

Federal Reserve Leaves Interest Rates Alone

The Federal Reserve decided Wednesday to hold off on raising its short-term interest rates. But it hinted that it likely will deliver its third interest rate increase of the year at its next meeting in late September. The Fed’s key rate does not have a direct impact on mortgage rates.

“Economic activity has been rising at a strong rate,” the Fed’s statement read. Economic output rose at a 4.1 percent annual rate in the second quarter, which is the highest three-month increase since 2014.

The economy, the Fed, and inflation all have an influence on long-term fixed-rate mortgages. Rates are rising, the 30-year fixed-rate mortgage averaging about 4.71 percent, up from 4.09 percent in 2015, CNBC reports.

Source: “The Fed Didn’t Raise Rates. How to Prepare for the Next Hike,” CNBC (Aug. 1, 2018) and “Federal Reserve Holds Rates Steady, Says Economy Is Strong,” The Wall Street Journal (Aug. 1, 2018) [Log-in required.]