A suburban home with an upward trendline and a percentage sign.
Illustration by Lanette Behiry/Real Estate News; Shutterstock

Latest jump in mortgage rates could mean another slow spring 

The 30-year fixed rate rose to 6.77% this week, the highest level since mid-December.

February 15, 2024
3 minutes

Key points:

  • Strong economic data and elevated inflation have many expecting the Fed to delay rate cuts until the second half of 2024.
  • Mortgage applications continue to slow in conjunction with higher mortgage rates.
  • One bright spot for agents and buyers: Builder confidence continues to rise, which could lead to more new housing to address low inventory levels.

Mortgage interest rates jumped to their highest level so far this year as a resilient economy is keeping inflation elevated — and delaying expected rate cuts.

The 30-year fixed-rate mortgage averaged 6.77% this week, up from last week's average of 6.64% according to the latest Freddie Mac survey. It's the first time the rate has risen above 6.7% since mid-December.

The 15-year fixed-rate average moved into the 6% range this week, coming it at 6.12%. Last week it was 5.9%.

Rates appear to be climbing in response to the latest economic data. The inflation rate slowed in January, but not as much as expected, while the latest jobs report indicated that hiring remains strong.

The hotter-than-anticipated economy has led many to believe the Federal Reserve won't cut interest rates until the second half of 2024, months later than expected.

"The economy has been performing well so far this year and rates may stay higher for longer, potentially slowing the spring homebuying season," said Sam Khater, Freddie Mac's Chief Economist. "According to our data, mortgage applications to buy a home so far in 2024 are down in more than half of all states compared to a year earlier."

While a slower buying season is discouraging news for real estate agents, a less active spring market could help inventory build into the summer months — giving buyers more options at a time when rate cuts are more likely.

However, waiting for rates to fall may also hurt buyers if potential sellers hold off and inventory remains tight, leading to higher home prices, said Lisa Sturtevant, chief economist for Bright MLS.

"As a result, some buyers may find it makes sense to act now if they find a home that meets their needs," Sturtevant said.

Mortgage applications down

Mortgage applications fell 2.3% compared to a week earlier, and purchase applications were 12% below last year's pace, according to the Mortgage Bankers Association

Rising high mortgage rates and still-low inventory were the main culprits, said Joel Kan, MBA's deputy chief economist.

Builders sentiment continues to rise

With rate cuts still expected later this year, home builder confidence continues to improve. The National Association of Home Builders reported that its housing market index rose for the third straight month to 48, the highest level since August.

The prospect of lower rates and low existing inventory is driving the increased confidence, said Robert Dietz, chief economist at NAHB.

"While mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year," said Dietz, noting that the NAHB is expecting single-family housing starts to rise 5% this year.

Builders were most confident in the Northeast region, with an index score of 57. The Midwest and West had the lowest scores at 36 and 38 respectively.

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