Mortgage rates in the US climbed again, hovering near a 14-year high.
The average for a 30-year loan was 5.81%, up from 5.78% last week, Freddie Mac said in a statement Thursday. Rates diverged from the decline in yields for 10-year Treasuries. The latest increase for 30-year loans follows the biggest one-week jump since 1987.
This year’s massive run-up in borrowing costs has fueled a sudden shift in the previously frenzied US housing market. More sellers in some of the hottest pandemic boomtowns are cutting prices. Sales of previously owned homes fell in May to the lowest level in nearly two years, according to data released this week.
“The combination of rising rates and high home prices is the likely driver of recent declines in existing home sales,” said Sam Khater, Freddie Mac’s chief economist. “However, in reality, many potential homebuyers are still interested in purchasing a home, keeping the market competitive but leveling off the last two years of red-hot activity.”
The slowdown has led to major layoffs across the industry. The biggest US bank, JPMorgan Chase & Co., is laying off hundreds of home-lending employees and reassigning hundreds more. Brokerages Compass Inc. and Redfin Corp. are also cutting hundreds of workers.
“Market prices will continue adjusting to a smaller pool of qualified buyers and higher financing costs,” George Ratiu, Realtor.com’s manager of economic research, said in a note. “The move from an overheated real estate market toward a more sustainable one will take some time.”
For buyers of a median-priced home, the double-whammy of soaring prices and higher rates has pushed monthly mortgage payments to about 64% more than last year, according to Raitu.
This article was provided by Bloomberg News.