The typical summer sales slowdown is being made worse, economists say, by renewed geopolitical tension in the Middle East, putting upward pressure on inflation and causing more financial strain for would-be buyers.
The average 30-year fixed mortgage rate (FRM) rose 3 basis points to 6.58% from 6.55% last week, and the 15-year FRM averaged 5.96%, up from 5.93% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
While reaching its highest point since last August, the 30-year FRM still remains lower than it was at the same time one year ago (6.74%); the 15-year FRM is now higher than it was a year ago (5.87%).
With rates remaining elevated, Bright MLS Chief Economist Dr. Lisa Sturtevant expects a slower than usual drop in home sales to close out the summer.
“While transactions typically drop off from their May and June highs, this year data from NAR in June pending sales suggest that we will see a steeper than typically seen drop off in home sales in July and August,” Sturtevant said, adding that record-high home prices and gas prices along with inflation concerns are keeping buyers sidelined.
Realtor.com Economist Jiayi Xu agreed noting pressure on inflation will push a rate cut at July’s FOMC meeting almost certainly off the table.
“Driven by the rising energy prices, we may see a higher headline inflation reading in the coming month, but the key metric to watch is “core” CPI, which excludes volatile food and energy prices,” Xu said. “If core CPI doesn’t follow the headline number higher, that could offer some relief and potentially keep the Federal Reserve from a rate hike.”
The market remains resilient, economists note, with luxury sales seemingly propping up the housing market. “For now, that segment of the market appears to be sustaining its momentum despite rising rates,” she said.
In a statement, Freddie Mac Chief Economist Sam Khater reminded buyers to research offers for the best opportunity. “As market conditions continue to evolve, borrowers should remember that shopping around for a mortgage rate can make a meaningful difference, potentially saving them thousands over the loan’s lifetime.”
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