Weekly Mortgage Rates Rise, Higher Prices Take a Toll

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Written by Kate Wood
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Edited by Mary Makarushka
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With Memorial Day behind us, homebuying season should be in full swing. But with mortgage rates on the high side, purchase and refinance applications are at their lowest levels since early March, according to the Mortgage Bankers Association. "Borrowers remain sensitive to small increases in rates," Joel Kan, MBA vice president and deputy chief economist, said in a statement.

The average rate on the 30-year fixed-rate mortgage rose to 7.02% in the week ending May 30, according to rate information provided to NerdWallet by Zillow. It was an increase of 15 basis points from the previous week. (A basis point is one one-hundredth of a percentage point.)

Mortgage interest rates rose this week despite a dearth of obvious market momentum or attention-grabbing economic headlines. This contrasted with the previous week, when mortgage rates likewise lacked clear motivation but headed downward.

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Inflation still stings

Home buyers' hesitancy might not just be about mortgage interest rates running high. Lately, it seems everything feels more expensive, and that could be turning off would-be buyers.

On the one hand, the rate of inflation, as measured by the Bureau of Labor Statistics' consumer price index, has declined substantially since peaking at 9.1% in June 2022. As of April 2024, inflation's slowed to 3.4%, which is undeniably a better pace.

But that's probably not the way you're thinking about it when you're buying groceries, let alone shopping for a new home. Financial journalist Felix Salmon noted in Axios this week that regular folks aren't contemplating the rate at which prices have changed year over year. "A more intuitive concept of inflation," he writes, "is just 'Am I paying higher prices for things than I used to.'"

The answer to that question is going to vary depending on the item and your timeframe, but that relative difference can be pretty painful. It's sort of like the temperature, where there can be a big gap between what the thermometer says and what it feels like to be outside. Even if inflation is actually slowing, the “feels like” inflation rate is still uncomfortable.

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Home prices don't just feel higher

Whether or not you've been trying to buy a home, you'd almost definitely say home prices are higher than they used to be. That's because they are. As with inflation, we may be seeing a slowdown. But home prices have already risen so much that it's not much of a relief.

The latest Federal Housing Authority Home Price Index, released this week, showed that home prices in January through March of this year rose by 6.6% compared with the same period in 2023. But looking at the quarter-over-quarter stats, home price appreciation has been slowing over the past six months. Prices are sort of going from worse to bad.

How bad will really depend on where you are in the country. Sun Belt states like Texas, Louisiana and Florida have seen flattened price growth and even price drops, according to March 2024 data (the most recent available) from real estate tech firm ICE Mortgage Technology. On the other hand, prices in other parts of the country continue to rise, with the strongest growth in the Northeast and the Mid-Atlantic.

Many buyers are likely feeling sticker shock as they search for homes, and higher mortgage rates certainly aren't helping. Finding an affordable home could mean considering a different location, compromising on wish-list items, taking on a property that needs some renovation — or all of the above.

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