Mortgage rates eased downward a little this week, but they’re still firmly north of 7%.
The average rate on a 30-year fixed-rate mortgage slid eight basis points to 7.26% APR in the week ending Oct. 22, according to rates provided to BW by Zillow. (A basis point is one one-hundredth of a percentage point.) We calculate our weekly average using daily APRs recorded over the past five business days.
Mortgage rates have been above 7% for roughly a month, which is about how long they spent at that level in spring 2024, the last time we saw rates this high. Rates spent significantly longer in 7% territory in fall 2023, and it’s starting to look like that’s what we may be in for. Major forecasters are uniformly predicting the 30-year will stay at this level into next year.
I could try to give you some kind of but-hey-look-on-the-bright-side cheer. Honestly, though? If there ever was a week to wallow in the state of the U.S. housing market, it might be this one. A slew of new data was released this week, and it truly emphasizes how challenging this market is for every player in it.
Home buyers battle higher rates and high prices
Potential home buyers are being stymied by rising mortgage rates, though to be fair, it isn’t just about rates. High home prices and limited inventory are making it harder for buyers, too.
I mentioned a couple of recent instances of mortgage rates above 7%, but mortgage rates were above 7% for basically all of the 1970s, ’80s and ’90s. Back then, though, lower prices (and higher wages relative to those prices) made it easier to afford a home. Thirty years ago, Freddie Mac’s average 30-year mortgage rate came in at 7.86%. But the median price of an existing home in October 1996 was just $121,400, according to data from the National Association of Realtors. (That’s roughly $258,000 in today’s dollars.)
It’s safe to say that home prices have outpaced inflation in the years since. We don’t have October 2026 numbers yet, but in September the median sale price for an existing home was $417,500. So today’s prices make mortgage rates in the 7% range hurt that much more.
On Tuesday, the NAR released data on pending home sales in September. Pending means an offer’s been accepted and the home is under contract, but the deal hasn’t closed, so it’s a look-ahead figure. With how long it takes to close on a home, September’s pending data is likely a preview of October’s sales numbers. Spoiler alert: It’s not looking great.
BEST THAT YOU CAN DO: If you are in a position to buy at today’s mortgage interest rates (and home prices), at least there’s not much competition. That means you can take your time and negotiate. In many local markets, buyers have more leverage than we’ve seen in a while. Want the seller to pay for points or a temporary rate buydown? Don’t be afraid to negotiate.
Many homeowners are stuck in place
If home prices are so high, you’d think it’s still a good time to be a home seller, right? But the thing about selling your home is that it usually means you’re now also a home buyer — and today’s rates and prices can be tough even if this isn’t your first rodeo.
This morning, Realtor.com released an analysis of Federal Housing Finance Agency data on outstanding mortgages (in other words, mortgages held by current homeowners). As of the second quarter of this year, 49.1% of outstanding mortgages have an interest rate that’s 4% or lower.
I know, I know, no one’s pitying the sad homeowners with extremely affordable mortgages. But think about the math on selling a home in that situation.
Not only are you facing the possibility of a mortgage rate that’s potentially double what you previously had, but you’re also dealing with significantly higher home prices. If you purchased or refinanced when rates were below 4%, chances are you also bought when home prices were lower.
For many potential sellers, even moving to a comparable home would mean a significant increase in housing costs. This could leave a large group of homeowners feeling stuck in homes they believe they can’t afford to sell, even if they desire to move.
If this situation resonates with you, consider consulting with local real estate agents to determine the potential selling price of your current home. If it seems like you could make a substantial profit after paying off your current mortgage, it might be possible to reduce your next mortgage amount. By borrowing less, you could make purchasing a more expensive home, even with a higher mortgage rate, more feasible. sentence: Please rewrite the sentence so I can better understand it.