Rise in 30-year mortgage rate weighs on US builders
We track the recent volatility of mortgage rates
Throughout this year, mortgage interest rates have trended steadily higher, with the 30-year fixed rate jumping to 6.70% on September 29, according to Freddie Mac. It is the highest rate since 2007 and 25.5% higher than this millennium’s average of 4.99%.
Understandably, builder sentiment as gauged by the National Association of Home Builders/Wells Fargo Housing Market Index began its steady nine-month decline around the same time interest rates initiated their ascent to today’s level.
Builders were correct in their assessment of the market. With inflation rising, the Federal Reserve was expected to combat that growth by boosting interest rates this year, which would eventually influence mortgage rates and spending. Indeed, the Fed has raised rates to their highest level since 2008, and more increases are expected.
In response to the higher interest rates, mortgage rates doubled from the beginning of the year to the September 29 reading of 6.70%. The result has been a marked reduction in single-family home construction.
The current 30-year fixed rate remains low in a longer-term comparison that averages 7.80% dating back to April 1971, when data were first published.
From November 2008 — the last time the 30-year rate was over 6.00% — to the beginning of this year, the average 30-year mortgage rate has been 4.01%. While the current rate is still relatively low, a generation of potential home buyers have not experienced rates this high.
Lawrence Yun, chief economist for the National Association of Realtors, recently said, “Only when inflation calms down will we see mortgage rates begin to steady.”