Tag: Home Buying & Selling

Home buyers thought mortgage rates were finally going to go down. Why hasn’t it happened yet?

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Why are mortgage rates still so high?

After a year of mortgage rates near 8%, home buyers are eager for good news. Some forecasters have buoyed their hopes, estimating that the rate on the 30-year mortgage will drop to 6% or lower this year.

But rates have not fallen by much thus far. The 30-year rate is currently averaging 6.64%, according to Freddie Mac. That’s despite the fact that the U.S. Federal Reserve hasn’t raised its benchmark interest rate since July 2023 and signaled in December that it would cut that rate in 2024. Meanwhile, economists in the real-estate sector have been anticipating a drop in mortgage rates since last fall.

“Homebuyers may be feeling like the lower mortgage rates they’ve been promised in 2024 are not materializing,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. In a recent survey of Americans’ feelings about the housing market, 36% of respondents said they expect mortgage rates to fall in the next 12 months.

While the Fed doesn’t set mortgage rates, it can influence them, just as it influences the overall U.S. economy through monetary policy. But even though the central bank has hit the brakes on tightening monetary policy, with the economy giving off mixed signals of strength and weakness, the timing of anticipated cuts to the benchmark rate remains unclear.

That in turn creates uncertainty about when mortgage rates will drop enough to “unfreeze” the housing market. Home buyers are probably going to have to wait until the Fed acts definitively before they see those lower rates.

The effect of a strong economy

The strength of the U.S. economy is one reason mortgage rates have not yet fallen much, economists say. The job market is still hot, and inflation remains higher than the Fed’s goal, which is why the latest read on inflation, out Feb. 13, will be so closely watched. The fact that rates haven’t fallen this year is “a result of uncertainty about the economy and the timing of the Fed’s rate cuts,” Sturtevant said.

“The strong job market is good news for the spring buying season, as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, told MarketWatch.

Another reason mortgage rates are still high is that lenders are trying to protect themselves against lower rates in the future, Cris deRitis, deputy chief economist at Moody’s Analytics, told MarketWatch. If rates fall, lenders run the risk that a borrower will pay off a loan early by refinancing. That would limit how much in interest that lender could expect to make.

“In an odd sort of way, then, the expectation that mortgage rates will be lower in the future can lead lenders to increase rates today to compensate for the prepayment risk,” deRitis said.

Lower rates, more competition among buyers

So when can prospective buyers expect mortgage rates to fall significantly?

“Homebuyers should expect mortgage rates to move lower as we head through 2024,” Sturtevant said. While Fannie Mae expects rates to fall below 6% by the end of the year, other economists, like Fratantoni, expect the 30-year rate to finish the last quarter of 2024 at 6.1%.

But even if rates do fall, that won’t necessarily mean buyers will be better able to afford a home, because a drop in rates could heat up competition for homes even as it boosts buyers’ purchasing power.

“There is still very low inventory in the market, and buyers need to act quickly when they find the right home for them,” Sturtevant said.

For the many homeowners who currently have a mortgage rate below 4%, rates stuck in the 6% range may be leading them to put off plans to sell their home and buy a new one.

But it’s worth noting that since 2000, rates on 30-year mortgages have ranged from a high of about 8.62% to a low of 2.81%, averaging about 5% over that span. And compared with the historical average of the 1970s, which was 7.7%, the current rates in the 6% rage are not that high, deRitis noted.

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February 12, 2024

Here’s why you might not have to pay a 6% commission next time you sell a home

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Going back decades, if you wanted to buy or sell a stock on the open market, you had to pay a 2% commission to buy and a 2% commission to sell. Then the advent of discount brokerage, led by Charles Schwab Corp.
SCHW,
+1.64%,
made lower commissions available until eventually, with improved technology and efficiency, the entire industry changed to enable the average investor to avoid commissions completely.

But the internet hasn’t done much to reduce the cost of selling a home in the U.S. Sellers typically pay a 6% commission to a real-estate agent to list and sell a home, with the seller’s agent splitting that commission with the buyer’s agent. But all of that may change because of a verdict this week in a class-action lawsuit in federal court against the National Association of Realtors.

Aarthi Swaminathan covers the case, what may happen next and the implications for home sellers and buyers:

Real-estate advice from the Moneyist

MarketWatch illustration

Quentin Fottrell — the Moneyist — works with three readers to answer tricky real-estate questions:

Economic outlook

On Wednesday, Federal Reserve Chair Jerome Powell may have bolstered the case that the central bank is finished raising interest rates for this economic cycle. The federal-funds rate was left in its target range of 5.25% to 5.50%.

Jon Gray, the president of Blackstone Group, spoke with MarketWatch Editor in Chief Mark DeCambre and said he expected the Fed to succeed in bringing down inflation without pushing the U.S. economy into a deep recession.

Friday employment numbers: Jobs report shows 150,000 new jobs in October as U.S. labor market cools

Bond-market trend switches again

The U.S. Treasury yield curve has been inverted for nearly a year.

FactSet

Normally, longer-term bonds have higher yields than those with short maturities. But the yield curve has been inverted for nearly a year, with 3-month U.S. Treasury bills
BX:TMUBMUSD03M
having higher yields than 10-year Treasury notes
BX:TMUBMUSD10Y.

There has been elevated demand for long-term bonds, as investors have anticipated a recession and a reversal in Federal Reserve interest-rate policy. When interest rates decline, bond prices rise and vice versa.

As you can see on the chart above, the yield curve was narrowing until mid-October. Yields on 10-year Treasury notes were close to 5% on Oct. 19, but they have been falling the past several days as the three-month yield has remained close to 5.5%.

In this week’s ETF Wrap, Christine Idzelis reports on where all the money is flowing in the bond market.

In the Bond Report, Vivien Lou Chen summarizes the action as investors react to the Federal Reserve’s decision not to change its federal-funds-rate target range this week and to other economic news.

For income-seekers looking to avoid income taxes, here’s a deep dive into municipal bonds, with taxable-equivalent yields and a deeper look at those within four high-tax states.

Ford’s good news — in the bond market

Ford Motor Co.’s debt rating has been lifted by S&P to investment-grade.

Getty Images

Ford Motor Co.’s
F,
+4.14%
credit rating was upgraded to an investment-grade rating by Standard & Poor’s on Monday. This takes about $67 billion in bonds out of the high-yield, or “junk,” market, as Ciara Linnane reports.

A stock-market warning based on history

The original Magnificent Seven.

Courtesy Everett Collection

By now you have probably heard the term “Magnificent Seven” used to describe stocks of the tremendous tech-oriented companies that have led this year’s rally for the S&P 500
SPX
: Apple Inc.
AAPL,
-0.52%,
Microsoft Corp.
MSFT,
+1.29%,
Amazon.com Inc.
AMZN,
+0.38%,
Nvidia Corp.
NVDA,
+3.45%,
Alphabet Inc.
GOOGL,
+1.26%

GOOG,
+1.39%,
Meta Platforms Inc.
META,
+1.20%
and Tesla Inc.
TSLA,
+0.66%.
With Tesla’s recent decline, that company is now the ninth-largest holding in the portfolio of the SPDR S&P 500 ETF Trust
SPY,
which tracks the benchmark index. Here are the top 10 companies held by SPY (11 stocks, including two common-share classes for Alphabet), with total returns through Thursday:

Company	Ticker	% of SPY portfolio	2023 total return	2022 total return	Total return since end of 2021
Apple Inc.	AAPL, -0.52%	7.2%	37%	-26%	1%
Microsoft Corp.	MSFT, +1.29%	7.1%	46%	-28%	5%
Amazon.com Inc.	AMZN, +0.38%	3.5%	64%	-50%	-17%
Nvidia Corp.	NVDA, +3.45%	3.0%	198%	-50%	48%
Alphabet Inc. Class A	GOOGL, +1.26%	2.1%	44%	-39%	-12%
Meta Platforms Inc. Class A	META, +1.20%	1.9%	158%	-64%	-8%
Alphabet Inc. Class C	GOOG, +1.39%	1.8%	45%	-39%	-11%
Berkshire Hathaway Inc. Class B	BRK.B, +0.80%	1.8%	13%	3%	17%
Tesla Inc.	TSLA, +0.66%	1.7%	77%	-65%	-38%
UnitedHealth Group Inc.	UNH, -0.98%	1.4%	2%	7%	9%
Eli Lilly and Company	LLY, -2.15%	1.3%	60%	34%	115%
Sources: FactSet, State Street (for SPY holdings)

Five of these stocks (including the two Alphabet share classes) are still down from the end of 2021. SPY itself has returned 14% this year, following an 18% decline in 2022. It is still down 7% from the end of 2021.

Mark Hulbert makes the case that a decade from now, the Magnificent Seven are unlikely to be among the largest companies in the stock market.

A different market opportunity: India is seeing a multidecade growth surge. Here’s how you can invest in it.

The MarketWatch 50

The MarketWatch 50 series is back, with articles and video interviews starting this week, including:

PayPal soars after earnings report

PayPal CEO Alex Chriss.

MarketWatch/PayPal

After the market close on Wednesday, PayPal Holdings Inc.
PYPL,
+1.89%
announced quarterly results that came in ahead of analysts’ expectations, and the stock soared 7% on Thursday even though the company lowered its target for improving its operating margin.

In the Ratings Game column, Emily Bary reports on the positive reaction to PayPal’s new CEO, Alex Chriss.

A less enthusiastic earnings reaction: EV-products maker BorgWarner’s stock suffers biggest drop in 15 years after downbeat sales outlook

Consumers drive mixed reactions to earnings results

Apple Inc. reported mixed quarterly results.

Mario Tama/Getty Images

Here’s more of the latest corporate financial results and reactions. First the good news:

And now the news that may not be so good:

Harsh verdict for SBF

It might seem that some legal battles never end, but it took only a year from the collapse of FTX for the cryptocurrency exchange’s founder, Sam Bankman-Fried, to be convicted on all seven federal fraud and money-laundering charges brought against him. The charges were connected to the disappearance of $8 billion from FTX customer accounts.

Here’s more reaction and coverage of the virtual-currency industry:

Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.

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November 3, 2023

Home buyers flee the housing market as mortgage rates surge to the highest level since 2000

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The numbers: Mortgage rates rose for the fourth week in a row to the highest level since 2000, as the economy continues to show strength.

Rates surged as the U.S. economy continued to show signs of resilience, which signal to the market that the U.S. Federal Reserve may not be done with rate increases.

The 30-year was averaging at 7.31%, which in part dampened demand for home-purchase mortgages to the lowest level since April 1995.

Demand for both purchases and refinancing fell. That overall pushed down the market composite index, a measure of mortgage application volume, the Mortgage Bankers Association (M.B.A.) said on Wednesday.

The market index fell 4.2% to 184.8 for the week that ended Aug. 18, relative to a week earlier. A year ago, the index stood at 270.1.

Key details: High mortgage rates are weighing on home buyers’ budgets due to an increase in borrowing costs. Many buyers fled the market as a result of rates rising over the last week. The purchase index, which measures mortgage applications for the purchase of a home, fell 5% from last week.

Rates hold little allure for homeowners hoping to refinance. The refinance index fell 2.8%.

Rates rose across the board.

The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 7.31% for the week ending August 18. That’s up from 7.16% the week before, the M.B.A. said. The 30-year is at the highest level since December 2000.

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 7.27%, up from 7.11% the previous week.

The average rate for a 30-year mortgage backed by the Federal Housing Administration rose to 7.09% from 6.93%.

The 15-year rose to 6.72%, up from last week’s 6.57%.

The rate for adjustable-rate mortgages rose to 6.5% from last week’s 6.2%. The share of adjustable-rate mortgages rose to 7.6%, the highest level in five months.

The big picture: The housing market continues to be hammered by good economic news, which is pushing rates up and depressing home sales. Higher rates also discourage homeowners from selling, as their purchasing power erodes when they look for homes to buy.

As a result, both home-buying demand and supply of home listings continues to fall, bringing the market to a standstill. Until the economy shows signs of slowing, it’s likely that the housing market will remain in the doldrums.

What the M.B.A. said: “Applications for home purchase mortgages dropped to their lowest level since April 1995, as home buyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power,” Joel Kan, deputy chief economist and vice president at the M.B.A., said in a statement.

Kan added that there was an uptick in people using adjustable-rate mortgages. “Some home buyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed period,” he said.

Market reaction: The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was above 4.3% in early morning trading Wednesday.

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August 23, 2023
‘There’s nothing in the data that shows prices crash’: America’s housing market is showing remarkable resilience

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The housing market may feel out of whack to home buyers coping with fast-rising home prices and 7% mortgage rates. But like it or not, the housing market is in the pink of health.

Several economic indicators that measure housing activity — from home prices to sentiment surveys — show that home builders and sellers (the few that are out there) are finding strong demand from home buyers.

News of the housing market’s relative health may be welcome to some — like real-estate agents and investors — but it’s becoming a concern for economists. The more buoyant the housing market, economists say, the more likely the U.S. Federal Reserve will unveil another interest-rate hike, which further heightens the risk of a recession.

“‘The housing market has started to recover, and this is a problem for the Fed because more demand for housing will boost home prices and rents.’”

— Torsten Slok, chief economist at Apollo

“The housing market has started to recover, and this is a problem for the Fed because more demand for housing will boost home prices and rents,” Torsten Slok, chief economist at Apollo, wrote in a note in May. And housing is a big part of how the government measures inflation, he added. This will make it more difficult to reduce inflation from 5% to the Fed’s 2% inflation target, he said.

If the Fed launches another rate hike, it would push mortgage rates, which are already in the 7% range, to go even higher.

“The housing market is in a very — if fragile — recovery,” Mike Simonsen, founder and president of real-estate analytics firm Altos Research, told MarketWatch.

“There appears to be more demand than available supply for homes, especially in the real-estate market,” he explained, which is keeping home prices high, but that doesn’t mean demand could evaporate if the current situation changes. Recall when rates doubled from pandemic-era lows in 2021 to 7% last year, which zapped home-buying momentum.

House hunters have adjusted their expectations. But if rates were to jump from 7% today to even higher levels, “I would not be at all surprised if homebuyers stopped abruptly again,” Simonsen said, stating his thesis for the fragility of the sector. Americans broadly expect rates to go over 8%, according to a March survey by the New York Federal Reserve.

MarketWatch looked at three housing-market indicators — and the picture looks rosier than ever:

Active listings are down — blame interest rates

Redfin’s deputy chief economist, Taylor Marr, said his go-to indicator was active listings.

Active listings are down this spring, compared to the previous year, according to the company’s data. At the end of June, the number of homes listed for sale on the market was down 8.1% over the prior year.

“It really captures that supply is pulling back significantly relative to demand,” Marr said.

About 14 million mortgages were refinanced during the COVID-19 pandemic. Few homeowners find it in their interest to sell their home and give up an ultra-low mortgage rate they secured during that time. Selling a home in July 2023, and purchasing a new one may entail taking a mortgage rate in the 7% range.

Redfin data says that active listings of homes are down.

As a result, the housing market is seeing an excess of demand and not enough supply, which has led to a resurgence of bidding wars in some parts of the U.S.

While this metric is showing signs of the housing market returning to life and heating up amid a shortage of houses for sale, Marr said he’s not yet ready to call it a recovery. “It’s hard to declare completely the bottom of the housing market,” he said.

Still battle-scarred by the housing crash of the Great Recession, Marr said economists “might be hesitant” to say that the housing market is in recovery mode. “We still have a lot of uncertainty with the economy ahead,” he added. “If the economy really takes a turn three or four months from now for whatever reason, it could certainly bring the housing market back lower than it was even last November,” he added.

The price gap between new and existing homes

With a major shortage of resale homes, new-home sales have been taking off.

Home builders, understandably, are thrilled about the inventory shortage.

The National Association of Home Builders measures builders’ sentiment in a monthly index, and that indicator has been very cheery of late. In June, the index turned positive for the first time in nearly a year. Builders were scaling back price reductions; they were happy about current sales conditions as well as sales over the next six months, the NAHB said.

“A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year,” said Rob Dietz, chief economist of the NAHB.

One of the major U.S. home builders, Lennar, also offered some commentary on its second-quarter earnings call last month. The company’s executive chairman, Stuart Miller, said that “the market and the economy will remain constructive for home builders as pent-up demand continues to come to market and consume affordable offerings.”

Miller also doesn’t expect the supply issue to be fixed anytime soon: “We believe that the supply constraint will continue to limit available inventory and maintain supply-demand balance,” he said on the call. “The core elements of the supply shortage will not resolve in the near term as the almost 15-year production deficit will take years to resolve.”

Home-builder confidence, as a result, is signaling high optimism about the future of the housing market, and a return to normalcy.

As a result, housing starts have spiked as builders scramble to meet the demand.

Builders have ramped up building new single-family and multi-family homes.

Ali Wolf, chief economist at Zonda, looks at how prices of new homes trend relative to resale homes as a key indicator of the health of the housing market. Her conclusion? Housing industry professionals involved in the construction and sale of new homes are out of a recession, given the robust demand.

In fact, demand has been so strong that new homes — generally considered to be more expensive than resales — have become more affordable in home buyers’ eyes given the competition in the existing home space.

Typically, new homes are 20% more expensive than resales, Wolf said. And today? That spread has fallen to 4%.

So what’s going on? Builders are not necessarily slashing prices. Instead, existing home prices have risen as homeowners are reluctant to sell.

That’s a good deal for buyers. New homes, Wolf said, are traditionally considered a “luxury good.” They’re brand new, and buyers can often customize them. They also require less maintenance than older homes.

Sellers are holding out on cutting prices

Simonsen, who leads Altos Research, said price cuts were his go-to indicator to gauge the health of the real-estate market. Specifically, price cuts formed a proxy for demand, he explained.

“When the houses are on the market, if there are no buyers for the current houses that are listed, people start taking price cuts,” Simonsen said.

And to be clear, price cuts jumped last year, when rates jumped, he added.

But that dynamic has since changed, as seen in the chart below. “There are currently fewer price reductions now than in 2018 or 2019,” Simonsen said.

Data from Redfin says that homeowners aren’t cutting prices on their homes when selling, possibly due to strong interest from buyers.

And for those of you holding out for home prices to crash? Keep waiting, Simonsen said.

“There’s nothing in the data that shows prices crash,” he said. Even if a recession hits at the end of the year, which results in more job layoffs, demand for home-buying falling, and an increase in foreclosures and distress, that’s still a few years from now, he added.

“There’s no signal of home prices crashing anywhere,” Simonsen added.

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July 11, 2023
I ruined my family’s finances by withdrawing from my 401(k) to buy a house – I regret it

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I recently made a panic decision to withdraw all my money from one retirement account and I am now closing on a house in February (about $200,000). I am 36 years old, married and have a 1-year-old. Half of me is regretting it, and I’m worried about next year’s taxes due to the withdrawal and the 10% penalty I paid.

I have been saving up money with my family in order to buy our first home. Recently, however, interest rates have risen, making me worry that this window to get an affordable house was closing. In a fit of panic, I withdrew all of our $26,000 saved money from my 401(k), putting it in a high-yield savings account (3.75%). We have now chosen a home and will be using around $18,000 of this money for the down payment.

I am now worried that I might have to pay income taxes and a penalty for the withdrawal itself. I am extremely anxious over this situation as I feel I have destroyed our family’s financial future and that we cannot afford to pay taxes on the money I withdrew.

My main concern or question is, is there a way to tell the IRS that this money is being used toward a house? Retroactively?

See: I’m a single dad maxing out my retirement accounts and earning $100,000 – how do I make the most of my retirement dollars?

Dear reader,

The first thing you need to do: Take a breath. Most decisions should not be made in a panic, especially when involving money.

Because you withdrew from your 401(k), yes, you will have to pay taxes and a penalty. Had it been a loan, you’d have to pay interest on what you borrowed, but it would be to your own account. Keep in mind however that loans from your employer-based retirement plans are also risky – if you were to separate from your job, for whatever reason, you’d be responsible to pay it back or it would be treated as a distribution.

I understand your sense of urgency in wanting to buy a home during a more favorable market, but your time now should be spent on getting yourself financially situated and saving for the future.

“I wouldn’t advise this or done it this way, but he’s not stuck and it’s not detrimental – it’s just a tough lesson to learn,” said Jordan Benold, a certified financial planner at Benold Financial Planning.

Get very serious about your current finances and find a way to earmark a portion of your income to savings if at all possible. There are a few things you should be doing.

First, assess how much you will be paying in taxes and penalties. I’m not sure what your tax bracket is, but did this distribution push you into a higher tax bracket? You can use a calculator or talk to an accountant to see what that withdrawal will incur in taxes – then make sure you can pay it, or talk to the Internal Revenue Service about an extension. There are penalties for failing to file your taxes or pay them, and you don’t want to add that on top of your stress.

Also see: We have 25 years until retirement and are saving 25% of our income – are we doing it right? And are we saving too much?

The IRS may not be able to do anything for you in terms of waiving those penalties – though it doesn’t hurt to ask, even if you have to wait on the phone for a while to talk to someone – but communication and attention to detail are key when it comes to your taxes. Getting an IRS agent on the phone and talking through your situation won’t be time wasted. There are so many rules, and an agent can help make sense of your options.

Read: The days of IRS forgiveness for RMD mistakes may soon be over

Once you get that sorted, look extremely carefully at whatever money you have coming in and what’s going out. You’re about to close on a home, and that costs money – not just the home itself, but all of the extras associated with closing. You may also need money for insurance, furniture, any repairs and so on if you haven’t factored that in yet, so fit that into your budget for when you sign the papers. Beyond that, list every expense you expect to have for the next 12 months – home insurance and taxes, a mortgage or utilities, groceries, medicine, any other nonnegotiable costs and add it all up. Don’t forget anything – ask your partner if there’s anything you may have forgotten.

Then compare it to your income. Are you under? Are you over? What changes can you make without totally draining your happiness? I always advocate for a balance…yes, in some cases you have to omit a few expenses for the time being when building up an emergency savings account or paying down debt, but don’t completely rob yourself of joy or all of your hard work may backfire. If you really need to buckle down, make a separate list of activities and entertainment you can get for free (or as close to free as possible)—walks in the park or on the beach with your partner and child, museums on free days, pot lucks and at-home movie nights with family and friends and so on.

Want more actionable tips for your retirement savings journey? Read MarketWatch’s “Retirement Hacks” column

Earmark a portion of your income to replenish your retirement savings before you try saving for any other goals. (This is separate from an emergency savings account, however – you should have one of those.) You may do that with payroll deductions in your 401(k), or also by allocating some of your savings to an IRA outside of the 401(k).

Take some time to learn the rules of your retirement plans. For example, an IRA allows an investor to take $10,000 out of the account penalty-free if it’s for a first-time home purchase (whereas a 401(k) does not have that exception). It may be too late for that, but there are other perks with various retirement accounts.

The 401(k) has a higher contribution limit and also comes with the possibility of employer matches (if your company offers it), whereas an IRA allows for penalty-free withdrawals for college. With a traditional IRA, you’d have to pay taxes on the withdrawal, whereas with a Roth IRA you’ve already paid the taxes and won’t have to pay any more for withdrawing from your contributions (you may have to pay taxes on the earnings portion, so follow distribution rules closely).

Remember – you don’t want to make distributions from your retirement savings for just anything. You can borrow money for a home or college, but you can’t borrow money for retirement, so it’s important to protect those accounts. Familiarize yourself with the pros and cons of all accounts so that you can maximize your savings and diversify your withdrawal options when you finally get to retirement.

So just buckle down, get yourself in order and think of the future. “He’s got plenty of time – 30 to 40 years to work,” Benold said. “This might be a distant memory that he hopes he can forget.”

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

Readers: Do you have suggestions for this reader? Add them in the comments below.

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January 17, 2023
Housing starts fall again as high mortgage rates scare off U.S. home buyers

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The numbers: Construction on new houses fell 4.2% in October as high mortgage rates put off buyers and forced builders to scale back, a situation that’s likely to continue through 2023.

U.S. housing starts slowed to an annual pace of 1.43 million last month from 1.49 million in September. That figure reflects how many homes would be built in 2022 if construction took place at same rate over the entire year as it did in October.

Economists polled by MarketWatch had expected housing starts to register a rate of 1.41 million after adjusting for the typical seasonal swings in demand.

New construction hit a record 1.8 million in April before tapering off.

The number of permits, meanwhile, slipped 2.4% to a rate of 1.53 million, down sharply from a record 1.9 million last December.

Permits foreshadow how many houses are likely to be built in the months ahead, assuming a stable real estate market. But a major increase in mortgage rates this year has depressed demand and forced builders to scale back plans.

Key details: Single-family home construction fell 6.1% to an annual rate of 855,000 in October. Projects with five units or more registered a 556,000 rate, little changed from the prior month.

Housing starts are down 9% from a year ago, when mortgage rates briefly dipped below 3%.

Permits have fallen 10% from a year earlier.

Big picture: The highest mortgage rates in several decades have stifled new construction and are likely to do so through the next year or longer. The rate on a 30-year fixed mortgage recently topped 7%, more than double the rate a year ago.

While the U.S. has an acute need for more housing, fewer people can now afford to buy a home. Home prices are starting to come off record highs, but not by much.

Looking ahead: “Higher mortgage rates continue to exact a heavy toll on new construction,” said Richard Moody, chief economist of Regions Financial.

Market reaction: The Dow Jones Industrial Average
DJIA,
-0.18%
and S&P 500
SPX,
-1.01%
fell in Thursday trades.

Also read: The median income needed to buy a typical home is over $88,000 — $40,000 more than before the pandemic

Related: Home prices will fall in 2023, but affordability will be at its worst since 1985, research firm says

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November 17, 2022
Mortgage rates march towards 7%, reaching highest level since 2007

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The numbers: Mortgage rates continue to march towards 7%, continuing to pressure potential homeowners looking to buy a home.

The 30-year fixed-rate mortgage averaged 6.7% as of Sept. 29, according to data released by Freddie Mac
FMCC,
+0.75%
on Thursday.

Mortgage rates are up as the Federal Reserve pushed key interest rates up to deal with the worst inflation the country has seen in 40 years.

That’s up 41 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%.

The rise in rates is bad news for prospective buyers, as it potentially adds hundreds of dollars to their mortgage payments.

Mortgage rates are now at highs last seen since mid-2007. To put the latest rate in perspective: A year ago, the 30-year was at 3.01%.

“Mortgage rates are now at highs last seen since mid-2007. To put the latest rate in perspective: A year ago, the 30-year was at 3.01%.”

Bloomberg’s chief economist Michael McDonough said a $2,500 monthly mortgage payment — with 20% down — would have gotten a buyer a $758,000 home last year.

This year? You’d get a lot less house — with $2,500 per month, you’d only be able to afford a $476,000 home, he wrote on Twitter
TWTR,
-1.12%.

The median price of an existing home in the U.S. was $389,500 in August, down from $403,800 the previous month, the National Association of Realtors said.

The average rate on the 15-year mortgage also rose over the past week to 5.96%. The adjustable-rate mortgage averaged 5.3%, up from the prior week.

“The uncertainty and volatility in financial markets is heavily impacting mortgage rates,” Sam Khater, chief economist at Freddie Mac, said in a statement.

Khater added that Freddie Mac’s survey of lenders revealed a large dispersion in rates, so home buyers should shop around with lenders to find a good quote.

Mortgage applications also fell in the latest week, as cautious buyers continue to pull back as rates march towards 7%.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.784%
rose slightly above 3.8% in morning trading on Thursday.

Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com

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September 29, 2022