The Iran War continues to weigh on the economy, and in turn the housing market, with mortgage rates this week peaking to “the highest level since May 2024,” as noted by Mortgage Bankers Association President and CEO Bob Broeksmit.
According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 7.03% this week, up from last week’s average of 6.95% and up from 6.30% at the same time last year. The 15-year FRM averaged 6.42%, up from last week’s 6.26% average and last year’s 5.49%.
Notably, last week’s average of 6.95% was already a 100-basis point rise from when the Iran War kicked off back in February.
Freddie Mac’s Chief Economist Sam Khater did not sound the alarm bell for housing just yet, noting in a statement that the market “remains supported by a solid labor market and an economy that is growing at a healthy rate.”
Realtor.com Senior Economist Anthony Smith noted that since the Federal Reserve increased interest rates by a quarter point last week, the “messaging since has leaned hawkish.”
“Governor Michael S. Barr acknowledged his support for the unanimous decision to hike. He argued the Fed had been ‘out of position’ given changes in the economy and said his base case is that ‘further policy adjustments are likely to be needed to bring inflation back to target in a timely fashion,’” he explained. “Barr also noted that roughly half of outstanding mortgages still carry a rate of 4% or below, which keeps existing owners locked in place.”
Specifically looking at how this rate increase is affecting buyers and sellers, Smith said that this peak is landing “in the midst of a slowdown” as the housing market moves into what is typically a decreased rate of activity for the fall and winter.
He did note, however, that the rising rate situation “will continue to add to the headwinds in place for home sales.”
