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Mortgage rates touch 8% for the first time since August 2000
View Date:2024-12-23 19:22:20
Mortgage rates hit 8% on Wednesday, the highest level since August 2000 and deepening an affordability crisis for homebuyers.
The average rate for a 30-year loan touched 8% on Wednesday, according to Mortgage News Daily, which surveys a range of lenders to determine current home loan rates.
Higher borrowing costs — paired with elevated prices — have made home buying unaffordable for a larger swath of buyers, economists and researchers say. In about a dozen U.S. states, families with a median income for their area cannot afford a mortgage, according to recent research from Moody's. That's up from only two states in 2019.
"The 23-year high in mortgage rates also goes a long way towards explaining why sellers have withdrawn from the market," Thomas Ryan, a property economist with Capital Economics, said in a research note Wednesday. "The increase in mortgage costs homeowners would incur by getting a new mortgage to move has stopped many from attempting to move altogether and led listings of new homes for sale to drop by a third."
Rising mortgage rates come at a time when median home prices have remained elevated for most of 2023. The national median home price was $430,000 last month, up from $400,000 in January, according to Realtor.com.
Still, other groups tracking home loans peg the 30-year mortgage at slightly below 8%. The Mortgage Bankers Association (MBA) said on Wednesday that the typical home loan stood at 7.7% this week, while Freddie pegged the average rate at 7.57% as of Oct. 12.
Impact on home sales
Even high-income earners in cities like Boston, Miami, Phoenix, Salt Lake City and Seattle cannot afford a mortgage under the median home prices in those areas, a LendingTree report released Tuesday found.
"Ultimately, until mortgage rates and home prices both start to show more significant and sustained declines, affordability challenges are likely to persist for high and low income earners alike," LendingTree Senior Economist Jacob Channel said in the report.
Higher mortgage rates have contributed to the decline in mortgage applications and home sales, according to data from the MBA and the National Association of Realtors.
Mortgage rates have jumped this year partly because the Federal Reserve raised its benchmark rate several times in an attempt to cool inflation.
A group of housing associations this month urged Fed Reserve officials to hold off on additional rate hikes and to take other actions that would help lower mortgage rates. The Community Home Lenders of America, National Association of Realtors and Independent Community Bankers of America also sent a letter to U.S. Department of Treasury Secretary Janet Yellen this month asking for relief.
Rising mortgage rates have made "a significant negative effect on the ability of a family to qualify for and purchase a home, particularly for first-time homebuyers," the groups said in a letter to Yellen.
- In:
- Mortgage Rates
- Home Sales
- Affordable Housing
Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
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