The average rate for a 30-year fixed rate mortgage has topped 7% for the first time in 20 years – almost double the rate 12 months ago – making it much harder for would be home buyers. Further, the pace of home sales has declined for eight consecutive months as frustrated buyers give up, unable to afford higher payments.
The weekly average for a 30-year fixed rate loan is now 7.08%. That’s the highest level since April 2002. Rising rates have also slammed the lid on home prices, which have declined 1%, according to the latest reading of a closely watched home price index.
This trend will likely accelerate in the coming months. Moody’s Analytics has forecast
an overall year-over year price decline of 6% nationally, and about a 10% fall from the price peak this past June.
Most analysts agree however that a nationwide housing shortage, combined with the fact that most homeowners are in fixed rate loans they can afford, will prevent a real crash in home prices. The only segment at risk could be those buyers who entered the market with the fear of being left out and may have made decisions similar to those in the last housing crisis. Only time will tell.