The Freddie Mac fixed rate for a 30-year loan jumped to 5.55% this week, in the wake of the 10-year Treasury’s strong advance. Investors are parsing through data highlighting a resilient economy, and keeping an eye on Fed Chairman Powell’s statements tomorrow. Expectations are that he will highlight the central bank’s commitment to continued monetary tightening for the remainder of the year. The Fed’s continued rate hikes, combined with balance sheet reduction through mortgage-backed securities rolloffs are expected to keep upward pressure on mortgage rates.
Looking ahead to the remainder of 2022, consumers’ confidence and their ability to weather higher prices are key to economic activity. The Biden administration’s decision to cancel $10,000 or more in student debt for millions of Americans is likely to offer a short-term boost in spending power. The savings in monthly expenses would bolster household budgets straining against rising prices and rents. Realtor.com’s latest report shows that rents have hit a new high, however, the pace of growth is moderating noticeably. In addition, construction of new multifamily buildings is picking up, pointing to an improvement in supply down the road, and offering the promise of a reprieve for weary tenants.
For homebuyers, today’s housing market is offering more options and a growing number of homes with price reductions. However, after a few months of improving new listings we are seeing a pullback in fresh inventory, which is worrying. Amid clear signs that affordability is curbing demand, some homeowners may fear that they missed the market’s peak. With real estate markets still contending with significant underbuilding, compounded by construction companies slashing single-family starts, the transition toward balance is losing steam. In turn, affordability continues to be a challenge for many buyers in the market. For someone looking at a median-priced home, today’s rate translates into a $2,050 monthly payment, a 61% jump from a year ago.