Mortgage rates climb to the highest level in a month

(CNN) — Mortgage rates rose this week, after five weeks of falling.

The 30-year fixed-rate mortgage averaged 6.39% in the week ending April 20, up from 6.27% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed rate was 5.11%.

“For the first time in over a month, mortgage rates moved up due to shifting market expectations,” said Sam Khater, Freddie Mac’s chief economist.

“Home prices have stabilized somewhat, but with supply tight and rates stuck above 6%, affordable housing continues to be a serious issue for many potential homebuyers,” he said. “Unless rates drop into the mid-5% range, demand will only modestly recover.”

Mortgage rates went higher than 5% for the first time since 2011 a year ago, and have remained over 5% for all but one week during the past year. Since then they have gone as high as 7.08%, last reached in November, and had been trending down since early March.

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders nationwide. The survey includes only borrowers who put 20% down and have excellent credit.

Rates climbed up this week as 10-year Treasury yields climbed higher. As investors responded to economic indicators, bond yields ticked higher, taking mortgage rates with them.

“Mortgage rates are the product of the larger economic environment, including inflation and employment data as well as banking stability and the Federal Reserve’s actions,” said Hannah Jones, economic data analyst at Realtor.com. “Recent data points to a still-resilient, though the cooling economy, leading many to believe the Fed will elect to raise the target rate at next month’s meeting.”

The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does, and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

Home buyers remain very sensitive to weekly changes in mortgage rates.

“Last week’s jump in mortgage rates led to a pullback in mortgage applications, as homebuyers remain sensitive to rate movements,” said Bob Broeksmit, CEO of the Mortgage Bankers Association. “The lack of housing inventory this spring buying season is also keeping many prospective buyers on the sidelines.”

While MBA expects mortgage rates to fall to around 5.5% by the end of this year, more housing supply is needed to improve affordability and meet demand, he said.

Last year’s persistent mortgage rate climb, combined with inflation and home price growth, led many buyers to retreat from the housing market, said Jones.

“While spring is typically a season marked by a lively housing market, this year is proving to be less energetic than previous ones,” she said.

Nevertheless, Jones added, buyer demand shows signs of improvement with each gain in affordability.

As a result, she said, “housing demand remains largely stifled as many buyers wait on the sidelines until the cost of purchasing a home becomes more doable.”

According to a latest report from the Utah Association of Realtors, the state’s median home sales price dropped nearly 8% in March compared to the same month last year.

THE UTAH MARKET

The median sales price in March was $479,368. One year ago, the median price was $520,500.

Year-over-year closed sales in the Beehive State were down more than 22% However, March showed an uptick in real estate activity compared to the winter months.

“I’ve had a number of realtors from Logan to St. George who have told me that the market is picking up,” said Deanna Devey, the realtor association’s communications director. “I think it’s a market where there are good things for buyers and there are good things for sellers.”

Devey said the market is very sensitive to changes in mortgage rates.

“Because affordability is so important and so critical right now, any little change in those interest rates is really affecting people coming out,” she said.

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