Mortgage Rates Climb Higher As Applications Fall To 22-Year Low – Forbes Advisor

Rates for home loans climbed higher this week as a combination of lofty home prices and surging financing costs continued to take a toll on buyer demand.

The 30-year, fixed-rate mortgage averaged 5.54% for the week ending July 21, up three basis points—one-one hundredth of a point—from the previous week, according to Freddie Mac. A year ago at this time, the popular product was roughly half that, at 2.78%.

The average 15-year, fixed-rate mortgage was 4.75%, up from 4.67% last week and sharply higher than 2.12% a year ago.

Those rates don’t include fees and other costs associated with obtaining home loans.

Related: Compare Current Mortgage Rates

What’s Ahead for Mortgage Rates

Mortgage rates are still slightly lower than the high they touched in late June at 5.81%, but it’s unclear what the rest of 2022 will look like. Housing-market experts forecast rates in a wide range—5% to 7%—for the rest of the year. The Federal Reserve will meet next week, and is widely expected to raise interest rates 75 basis points, or 0.75 of a percentage point, in an effort to contain inflation. Though the federal funds rate does not directly impact mortgage rates, any action by the Fed to raise its rate tends to cause a jump in mortgage rates.

Despite that, there are some bright spots for would-be buyers. There’s less competition, for one thing: Last week, applications for mortgages to purchase homes were 19% lower than a year ago, the lowest level since 2000, according to data from the Mortgage Bankers Association (MBA).

Buyers also have more options, with more homes available to purchase. Active inventory was 29% higher than a year ago, according to a report out Thursday from Realtor.com, which called that development “a welcome improvement for shoppers.” However, the report noted “the market still lags what was once normal, with fewer than half as many homes for sale in June than in 2019.”

The volatile dynamics of the housing market are taking a toll. On Wednesday, the National Association of Realtors (NAR) reported that nationwide sales of previously-owned homes had fallen for the third straight month. Sales were 14.2% lower than a year ago, even as prices touched a new median high of $416,000.

Opportunity For Home Buyers?

Real estate agents say market conditions are more positive for buyers than they have been in a long time.

Housing “is shifting back to a more stable market,” says Sean Carpenter, a Realtor at Coldwell Banker Realty in Upper Arlington, Ohio. But “we have a long way to go.”

With slightly fewer buyers in the market and a bit more inventory, the remaining home shoppers are being “more discerning,” Carpenter says. He advises home buyers to be patient, and focus on their “needs” list before trying to check off their “wants” list.

“Now we have to set expectations for sellers who’ve watched their neighbors sell over the past two years,” he says. “Sellers want yesterday’s pricing and buyers want tomorrow’s pricing.”