Mortgage rates in the United States are officially at their highest point in over two decades.
The average rate for a 30-year fixed mortgage contract hit 8.03% on Thursday, marking the highest rate since late 2000, according to Mortgage News Daily, which tracks historical mortgage rate data. Meanwhile, the average rate on a 15-year fixed mortgage contract was 7.35%, the highest level in 23 years.
With mortgage rates continuing to climb higher, the idea of homeownership is gradually slipping into less tangible territory for many would-be buyers, according to Lisa Sturtevant, chief economist at Bright MLS, a real estate agency based in Maryland.
“For many would-be homebuyers, a mortgage rate above 7% simply means that the numbers do not work for them,” she said, according to Bankrate. “Consumer confidence has started to stumble as individuals and households are becoming more anxious about the economy.”
On the other hand, existing homeowners are dealing with the opposite problem, with many homeowners feeling trapped in their current home, unwilling to sell over fears of being stuck with a higher mortgage rate on their next house.
“The 23-year high in mortgage rates also goes a long way towards explaining why sellers have withdrawn from the market,” said Thomas Ryan, property economist with Capital Economics, per CBS News.
Ryan explained that the increase in mortgage costs homeowners would incur by signing a new mortgage contract has ultimately stopped many from attempting to buy a new home altogether. This has resulted in new home listings tumbling by a third, he said.
With U.S. mortgage rates seemingly breaking out into new highs each week, Sam Khater, chief economist for Freddie Mac, recommends that borrowers shop around with multiple lenders for the best mortgage rate before deciding.
“With research showing down payment is the single largest barrier to first-time homebuyers attaining homeownership, borrowers should also ask their lender about down payment assistance,” said Khater, per CBS News.
As mortgage rates surge higher, the number of mortgage applications submitted each week has dropped off a cliff.
“Applications decreased to their lowest level since 1995, as the 30-year fixed mortgage rate increased for the sixth consecutive week to 7.70% — the highest level since November 2000,” said Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association.
Furthermore, with purchase applications down 21% compared to the same week last year, Kan said homebuying activity has continued to pull back due to “reduced purchasing power from higher rates and the ongoing lack of available inventory.”
Officials in North Texas are keeping an eye on housing inventory to ensure builders meet the needs of their respective cities. Dallas City Council members, for instance, have been aware of the city’s shortage of lower-income housing units.
To ensure developers are building homes fast enough, council members and development officials claimed they are making permitting a top priority. While Dallas is turning out residential permits for single-family homes quicker than in previous years, overall building permit activity under City Manager T.C Broadnax has been down year over year, in part due to the common delays and periodic backlogs seen at the City’s Development Services Department.