Mortgage rates climb, adding to affordability woes

Mortgage rates are up again after taking a slight dip last week, remaining in the mid-6% range. 

Although rates have come down roughly a percentage point since October, they remain well above pandemic-era rates while home prices continue to climb, adding to the persistent affordability crisis in the housing market.

Freddie Mac's latest Primary Mortgage Market Survey released Thursday showed that the average rate for the benchmark 30-year fixed mortgage climbed to 6.69% this week, an increase from 6.60% last week. The popular note averaged 6.13% a year ago.

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The rate on a 15-year fixed mortgage also increased, jumping to 5.96% after coming in last week at 5.76%. One year ago, the rate on the 15-year fixed note averaged 5.17%.

Sam Khater, Freddie Mac's chief economist, said in a statement that the stabilization of rates has caused some potential homebuyers to jump "off the fence back into the market."

Khater added, "Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace."

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There has been an increase in purchase activity recently despite higher rates, but the shortage of existing homes on the market is expected to continue to hinder the real estate market this year.

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"While softness in mortgage rates may encourage some buyers to re-enter the market, given that approximately two-thirds of outstanding mortgages currently boast rates below 4%, a notable portion of existing homeowners may opt to postpone their buying and selling plans and wait for the potential for even lower rates before making decisions about their next residences," said Realtor.com economist Jiayi Xu. 

"As a result, we expect the 2024 housing market will continue to be slow, particularly in light of the still-climbing existing home sales prices in December 2023."