"Home sales have declined significantly and, as we approach year-end, they are not expected to improve," said Sam Khater, Freddie Mac’s Chief Economist.
Khater's comment comes as the average long-term U.S. mortgage rate moved back above 7% and consumer prices remain near a multi-decade high.
The 30-year fixed-rate mortgage averaged 7.08% with an average 0.9 point as of Nov. 10, up from last week when it averaged 6.95%. A year ago at this time, the 30-year FRM averaged 2.98%.
The 15-year fixed-rate mortgage averaged 6.38% with an average 1.0 point, up from last week when it averaged 6.29%. A year ago at this time, the 15-year FRM averaged 2.27%.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.06% with an average 0.2 point, up from last week when it averaged 5.95%. A year ago at this time, the 5-year ARM averaged 2.53%.
Two weeks ago, the average long-term U.S. mortgage rate topped 7% for the first time in more than two decades, which combined with sky-high home prices, have crushed homebuyers’ purchasing power by adding hundreds of dollars to monthly mortgage payments.
Khater said: "The housing market is the most interest-rate sensitive segment of the economy, and the impact rates have on homebuyers continues to evolve. Home sales have declined significantly and, as we approach year-end, they are not expected to improve."
Sales of existing homes have declined for eight straight months as borrowing costs have become too big of an obstacle for many Americans already paying more for food, gas and other necessities. Additionally, many homeowners seeking to upgrade or change locations have held off listing their homes because they don’t want to jump into a higher rate on their next mortgage.
The sagging housing market has prompted real estate companies to dial back their financial outlooks and shrink their workforces. Online real estate broker Redfin on Wednesday said it was cutting 862 employees and shutting down its instant-cash-offer subsidiary RedfinNow.
Redfin also laid off 470 employees in June, blaming slowing home sales. Through attrition and layoffs, Redfin has slashed more than a quarter of its workforce on the assumption that the housing downturn will last "at least through 2023," it said in a regulatory filing.
Another online real estate broker, Compass, has laid off hundreds of workers this year.
While mortgage rates don’t necessarily mirror the Fed’s rate increases, they tend to track the yield on the 10-year Treasury note. The yield is influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.
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