US mortgage rates surge to two-month high

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Mortgage rates soared higher Friday after a monthly government report on wholesale prices showed inflation is still continuing and hotter than most analysts had predicted.
Mortgage rates soared higher Friday after a monthly government report on wholesale prices showed inflation is still continuing and hotter than most analysts had predicted.

Mortgage rates soared higher Friday after a monthly government report on wholesale prices showed inflation is still continuing and hotter than most analysts had predicted.

Mortgage Rates Reach Two-Month High

The average rate on the 30-year fixed mortgage surged to 7.14%, marking its highest level in two months, according to Mortgage News Daily. 

This increase follows a period of decline, with rates reaching around 6.6% in December after hitting a peak in October.

Data-Driven Spikes

Recent spikes in mortgage rates were triggered by government reports indicating higher-than-expected consumer prices. 

Matthew Graham, Mortgage News Daily’s chief operating officer, highlights the contrast in rate trends, noting that while rates are still lower compared to October, optimism for further declines in 2024 has been replaced by skepticism.

Impact on the Housing Market

The drop in rates towards the end of last year had generated optimism in the housing market, fueling an 8% increase in sales of newly built homes in December, as reported by the U.S. Census Bureau. Builders also observed rising buyer traffic to model homes, attributing it to lower interest rates.

Builder Sentiment and Buyer Expectations

The National Association of Home Builders’ index reflected improving builder sentiment for the past three months, with expectations of continued moderation in mortgage rates. 

NAHB Chairman Alicia Huey noted that even small declines in rates could positively influence buyer traffic, leading to increased buyer activity in the housing market.

Potential Impact on Buyer Behavior

However, the recent upswing in rates could deter prospective buyers. 

In January, when rates flattened after their decline, signed contracts on existing homes and new listings weakened, according to Redfin, a national real estate brokerage.

Looking Ahead

As President’s Day weekend traditionally marks the unofficial start of the spring housing market, the trajectory of mortgage rates in the coming months will play a crucial role in shaping buyer behavior and market dynamics. 

Despite strong demand, high home prices, and limited supply, fluctuations in mortgage rates continue to influence buyer sentiment and market activity.

Gary Monroe

Gary Monroe is a seasoned contributor to the Los Angeles Business Magazine, where he offers insightful analysis on local business trends and economic developments. With a focus on Los Angeles' dynamic commercial landscape, Gary's articles provide valuable perspectives for entrepreneurs and business professionals in the city.

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