Mortgage rates surged higher across the board again, with the 30-year fixed rate increasing for the fourth consecutive week to 7.24%. Both fixed and adjustable mortgage rates are about the highest they’ve been since we began collecting this data in January 2022, with the 5/1 ARM rate reaching a high of 5.99%.
Here are the current mortgage rates, without discount points unless otherwise noted, as of June 1:
— 30-year fixed: 7.24% (up from 7.18% a week ago).
— 20-year fixed: 7.08% (up from 7.05% a week ago).
— 15-year fixed: 6.63% (up from 6.47% a week ago).
— 10-year fixed: 6.74% (up from 6.58% a week ago).
— 5/1 ARM: 5.99% (up from 5.85% a week ago).
— 7/1 ARM: 6.16% (up from 6.01% a week ago).
— 10/1 ARM: 6.31% (up from 6.24% a week ago).
— 30-year jumbo loans: 7.27% (up from 7.25% a week ago).
— 30-year FHA loans: 6.55% with 0.06 point (up from 6.29% a week ago).
— VA purchase loans: 6.66% with 0.05 point (up from 6.43% a week ago).
“(Mortgage rates) remained elevated this week as negotiations over the government’s debt limit kept financial markets on edge. … While mortgage bond investors remain concerned about the downside risks for both the economy and housing markets, a successful debt ceiling bill is expected to bring mortgage rates lower in the weeks ahead.”
— George Ratiu, chief economist at Keeping Current Matters
The 30-year fixed mortgage rate has risen more than a quarter-point over the past month, from 6.92% in early May to 7.24% at the beginning of June. Mortgage rates are now at their highest point since November 2022
, when rates peaked at 7.33%.
Rising rates can be attributed to a few factors: For one, investors were reacting to the slim possibility of a government default last week, before Congress made progress on suspending the debt limit. The House and Senate voted this week to pass the debt ceiling deal, with the majority of Democrats and Republicans in favor of the bipartisan compromise. The bill now moves to President Joe Biden for his signature.
A successful vote on the debt limit is welcome news for investors, which could bring mortgage rates down from their current levels. But as we know by now, the debt ceiling isn’t the only thing putting upward pressure on mortgage rates. The U.S. economy has been surprisingly resilient against the Federal Reserve’s aggressive rate hikes, with low unemployment and uncomfortably high inflation.
In the coming weeks, Fed officials will be analyzing incoming economic data to determine the June rate decision. If the labor market shows continued strength, and inflation still runs well above the central bank’s 2% target, policymakers may be tempted to keep the federal funds rate elevated — or even vote to raise it higher. Mortgage rates would stay high or even rise in turn, exacerbating an affordability crisis that’s weighing on both homebuyers and prospective sellers.
On the other hand, it’s highly unlikely that the Fed will move to cut rates in June. In fact, the central bank released its economic projections in March showing the federal funds rate at 5.1% through the end of the year, meaning the Fed doesn’t forecast any rate cuts in 2023.
But just because the Fed says it won’t cut rates this year doesn’t mean it can’t happen. If the economy tumbles into a recession in the second half of 2023 as many forecasters predict, policymakers may be prompted to cut rates to spur economic activity. In the meantime, we’ll have to wait on more data on inflation and employment to determine if lower rates are on the horizon.
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Indicator of the Week: Despite 7% Rates, Home Prices Creep Higher
The latest S&P CoreLogic Case-Shiller Home Price Index
shows “counterintuitive strength with relatively strong home price growth,” says Selma Hepp, CoreLogic’s chief economist. Even with mortgage rates steadily above 7% during this time, home prices grew 1.3% monthly in March. Additionally, prices remain slightly higher than they were in March 2022, when mortgage rates were in the 4%-to-5% range. Hepp attributes stubbornly high home prices this spring to the imbalance of supply relative to demand. A strong return of buyers was met with low housing inventory, with homeowners reluctant to sell and sacrifice their record-low mortgage rates. The inventory of homes for sale grew in April, Zillow data shows, but supply remains well below pre-pandemic levels.
As a result, many homebuyers are forced to bid over the asking price, which is “driving early spring price gains well beyond what is traditionally seen during this period,” Hepp says.
“Buyer demand returned this spring, as growing families seek more space, retirees aim for a lower-cost locale, and young professionals want to move from the relentless cycle of rent increases to the benefit of wealth building,” says Ratiu. “In many markets across the country, some sellers are finding a surprising déjà vu: multiple bids and price escalation clauses.”
Of course, you can’t look at home prices on a national level without comparing regional trends. On an annual basis, the Southeast remains the country’s strongest region with 5.4% home price appreciation since last March, while the West is the weakest region with home prices falling 6.2% over the past year.
And yet, monthly data shows that a recovery may be underway in West Coast cities that were disproportionately impacted by the housing market slowdown in late 2022. San Francisco and San Diego saw the highest price gains between February and March. Among the top 20 U.S. housing markets, all saw monthly price growth in March — compared with just 12 in February.
“The silver lining for many buyers is the fact that in markets like Seattle, San Francisco, San Diego, Portland and Las Vegas, prices are lower than they were a year ago, reflecting a correction from the overheated peaks,” says Ratiu. “At the same time, with insufficient supply and resilient demand, price momentum seems to be picking up as we move toward summer.”
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Mortgage Rates Climb as U.S. Narrowly Avoids Default originally appeared on usnews.com