‘The numbers just don’t work’: While rising mortgage rates have some homebuyers giving up, others think they’ve found a workaround

S&P Futures

3,625.25

+27.75(+0.77%)

Dow Futures

29,895.00

+187.00(+0.63%)

Nasdaq Futures

10,846.00

+102.00(+0.95%)

Russell 2000 Futures

1,705.20

+16.90(+1.00%)

Crude Oil

85.94

+0.33(+0.39%)

Gold

1,659.10

+10.20(+0.62%)

Silver

18.40

+0.33(+1.82%)

EUR/USD

0.9733

+0.0009(+0.10%)

10-Yr Bond

4.0100

0.0000(0.00%)

Vix

32.42

+0.48(+1.50%)

GBP/USD

1.1247

+0.0067(+0.60%)

USD/JPY

148.6900

-0.0300(-0.02%)

BTC-USD

19,262.52

+85.40(+0.45%)

CMC Crypto 200

437.96

-10.22(-2.28%)

FTSE 100

6,892.79

+34.00(+0.50%)

Nikkei 225

26,775.79

-314.97(-1.16%)

‘The numbers just don’t work’: While rising mortgage rates have some homebuyers giving up, others think they’ve found a workaround

America’s most popular home loan got more expensive again this week, striking yet another blow to haggard home shoppers staring at the steepest borrowing costs in 20 years.

The average 30-year fixed mortgage rate — now flirting with the 7% mark — is more than double what it was at the beginning of the year.

Even as the surge in home prices continues to slow down, dramatically higher financing costs are pushing buyers onto the sidelines — or out of the market entirely.

“The numbers just don’t work for them anymore,” says Lisa Sturtevant, an economist with Bright MLS in the mid-Atlantic region.

“That 7% line is also something of a mental hurdle for buyers, even those who still qualify,” she says. “They may be waiting to see if rates are going to come down.”

Yet while many would-be buyers have stopped looking, others have found sort of a workaround to the higher rates.

Don’t miss

A TikToker paid off $17,000 in credit card debt by cash stuffing — can it work for you?

Chances are good you’re overpaying for home insurance. Here’s how to spend less on peace of mind

Invest your spare change and turn your pennies into a productive portfolio

30-year fixed-rate mortgages

The average rate on a 30-year mortgage jumped to 6.92% this week, up from 6.66% a week earlier, mortgage giant Freddie Mac reported on Thursday. Last year at this time, the rate averaged 3.05%.

The 30-year rate hasn’t been this high since April of 2002.

“We continue to see a tale of two economies in the data: Strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously,” says Sam Khater, Freddie Mac’s chief economist.

“The next several months will undoubtedly be important for the economy and the housing market.”

15-year fixed-rate mortgages

The typical rate on a 15-year mortgage was 6.09% this week, up from 5.90% last week, Freddie Mac says.

A year ago at this time, the 15-year rate averaged 2.30%.

Buyers today are facing a different reality from just a few months ago when many were forced to offer well above asking price and waive contingencies to score a home.

With rates making homes less affordable, sales have plummeted. In August, sales fell for the seventh straight month and were down 20% from a year earlier, according to the National Association of Realtors’ latest data.

5-year adjustable-rate mortgage

The rate on a five-year adjustable-rate mortgage (ARM) averaged 5.81% this week, up from 5.36% last week.

Last year at this time, the five-year ARM averaged 2.55%.

ARMs start out with a period of fixed interest rates — typically between three and 10 years. The rates are typically lower than they are on a fixed-rate loan, like the more popular 30-year mortgage.

But once the initial term ends, the rate on an ARM adjusts — up or down — based on a benchmark like the prime rate.

Read more: How much money do I need to make to be in the top 1%, 5%, and 10% in the US? It might be less than you think

The case for even higher mortgage rates

The Federal Reserve has hiked its trend-setting interest rate five times this year in order to slow the economy, but the uncomfortably rapid rise in consumer prices still isn’t letting up.

That means more rate hikes are coming — and while mortgage rates don’t directly correspond to changes in the Fed’s rate, they are influenced by them.

At the Fed’s last meeting, officials said the only way to combat inflation was to stay on an aggressive course of restrictive monetary policies.

“Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action,” according to the newly released minutes from the meeting.

A lower-rate alternative

Some buyers are trying to sidestep today’s higher borrowing costs by locking in their mortgage rate for a shorter amount of time.

“The popularity of adjustable-rate mortgages is increasing very quickly, as many borrowers believe they will have the opportunity to refinance into a fixed-rate mortgage at some point before their ARM adjusts,” says Corey Burr, a real estate agent in the Washington D.C. area.

He says borrowers considering this route should look at adjustable-rate loans with initial terms of seven or 10 years.

“That will increase the chances that an opportunity for a refinance will take place,” Burr says.

Mortgage applications this week

Mortgage activity has fallen again amid the rising rates, according to a weekly survey from the Mortgage Bankers Association.

Applications for refinances and purchases both fell by 2% compared to the previous week.

Refis are down 86% from last year, while purchase loan applications are off by 39%.

Mike Fratantoni, MBA’s chief economist, said the ARM share of applications also remained “quite high” at 11.7%.

What to read next

‘This truck can’t do normal truck things’: YouTube star says towing with Ford’s new electric pickup is a ‘total disaster’ in viral video — but Wall Street still likes these 3 EV stocks

‘I just can’t wait to get out’: Nearly three-quarters of pandemic homebuyers have regrets — here’s what you need to know before you put in that offer

‘Remarkable reversal’: President Biden just (quietly) scaled back student loan forgiveness — and the change could impact up to 1.5M borrowers. Are you one of them?

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Advertisement

GOBankingRates

8 Undiscovered Cheap and Beautiful Places To Retire

In planning for retirement, deciding “where” is just as important as determining how much you should save. And while it’s easy to find beautiful cities throughout the United States, not all of us can…

Bloomberg

The Time to Buy the Dip Is Fast Approaching — for One Country

(Bloomberg) — Investors are looking beyond a looming global recession and they see one country – and its financial markets – emerging strongest on the other side.Most Read from BloombergNATO-China Tension Over Ukraine Flares at Conference in IcelandRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesPound and UK Bonds Rally; US Stock Futures Advance: Markets WrapUS stocks and bonds will lead the way out of the current wave of market turmoil, according to respondents in the latest MLIV Pulse

Bloomberg

China Stocks Pare Losses as Traders Assess Xi’s Policy Signals

(Bloomberg) — Chinese stocks trimmed declines during afternoon trading as traders digested President Xi Jinping’s speech, which offered support for the tech sector but disappointed investors hoping for signs of a shift away from Covid Zero. Most Read from BloombergNATO-China Tension Over Ukraine Flares at Conference in IcelandRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesPound and UK Bonds Rally; US Stock Futures Advance: Markets WrapThe benchmark CSI 300 Index traded 0.1% lower as of

Motley Fool

These 3 Stocks Underperformed the Market This Year. Is Now the Time to Buy?

Mortgage real estate investment trusts (REITs), which invest in debt, not property, have also been sold off as the Federal Reserve has raised interest rates. AGNC Investment (NASDAQ: AGNC) is a mortgage REIT that focuses primarily on investing in mortgage-backed securities (MBS) that are guaranteed by the U.S. government. AGNC Investment is probably the safest stock in the mortgage REIT space given that a potential recession would impact it less than most other mortgage REITs.

TheStreet.com

Bearish Bets: 3 Stocks You Should Think About Shorting This Week

Using technical analysis of the charts of those stocks, and, when appropriate, recent actions and grades from TheStreet’s Quant Ratings, we zero in on three names. While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names. Plug Power Inc. recently was downgraded to Sell with a D+ rating by TheStreet’s Quant Ratings.

Bloomberg

Pound and UK Bonds Rally; US Stock Futures Advance: Markets Wrap

(Bloomberg) — The pound rallied and UK bonds surged amid expectations that more of Prime Minister Liz Truss’s package of unfunded tax cuts may be reversed. US stock futures were higher with investors preparing for a number of key earnings reports.Most Read from BloombergNATO-China Tension Over Ukraine Flares at Conference in IcelandRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesPound and UK Bonds Rally; US Stock Futures Advance: Markets WrapChancellor Jeremy Hunt is due to make a statem

Bloomberg

Bank Run Shows Risks From Widening Vietnam Corruption Probes

(Bloomberg) — It was a jarring image for one of the world’s fastest growing economies: Scores of Vietnamese flooded branches of the nation’s fifth-largest bank to pull out their savings amid rumors the lender was tied to a real estate conglomerate under investigation for fraud.Most Read from BloombergNATO-China Tension Over Ukraine Flares at Conference in IcelandRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesPound and UK Bonds Rally; US Stock Futures Advance: Markets WrapVietnam’s centr

Bloomberg

Goldman Sees Some Bargains in US But Finds S&P 500 Expensive

(Bloomberg) — Goldman Sachs Group Inc. sees attractive opportunities emerging in US stocks even as the S&P 500 benchmark remains expensive versus its history and accounting for interest rates.Most Read from BloombergNATO-China Tension Over Ukraine Flares at Conference in IcelandRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesPound and UK Bonds Rally; US Stock Futures Advance: Markets WrapThe risk-reward for the S&P 500 Index remains unattractive but “the degree of valuation dispersion wi

Motley Fool

Can Investors Trust AT&T’s Juicy 7% Dividend?

Currently, AT&T sports a high 7.4% dividend yield, which means the company will pay an estimated 7.4% of its stock price to shareholders each year. This number constantly fluctuates because it is calculated using the annual dividend payout divided by the stock price. The yield rises if the dividend goes up and the stock price stays the same.

The Wall Street Journal

JPMorgan, Citigroup and Wells Fargo Prepped for Recession. What Will Bank of America Do?

JPMorgan Chase, Citigroup and Wells Fargo all said Friday they had socked away hundreds of millions of dollars apiece to cover potential loan defaults. The message: Things might seem OK now, but don’t expect them to stay that way. Jamie Dimon, chief executive of JPMorgan, has been predicting a recession, or what he calls [an economic “hurricane,”](https://www.wsj.com/articles/jamie-dimon-says-u-s-consumers-still-have-six-to-nine-months-of-spending-power-11654102800?mod=article_inline) for months

Motley Fool

Down 40% or More, These Beaten-Down Cash-Rich Companies Can Keep Growing Even If Things Get Worse

The stock market has taken a nasty fall this year. Investors are increasingly concerned that the Federal Reserve’s actions to combat red-hot inflation will put the economy in a tailspin. While their stock prices are down more than 40% from their peaks, making it much more expensive to raise equity capital, that won’t limit them since they generate a lot of cash and have cash-rich balance sheets.

SmartAsset

Average Retirement Savings for Married Couples By Age

A recent study from the career experts Zety says that 40% of respondents fear retirement more than death. And almost nine in 10 responded that their biggest retirement fear is not having enough income. For married couples, planning retirement for two people can … Continue reading -> The post Average Retirement Savings for Married Couples By Age appeared first on SmartAsset Blog.

Leave A Reply

Your email address will not be published.