The Freddie Mac fixed rate for a 30-year loan rose four basis points this week to 6.34%, reflecting capital markets seeking clarity on this week’s employment figures amid the impending federal government shutdown. Mortgage rates rose last week, as well, following the upward trajectory of the 10-year Treasury, as investors reacted to positive data on new home sales, initial jobless claims and durable-goods orders.
This week, however, markets are facing renewed uncertainty. Investors are assessing the impact of a prolonged government shutdown. This week’s employment report from the Bureau of Labor Statistics is expected to go dark, leaving a large question mark about the state of the job market in September. Partially filling that gap, the numbers from the ADP report showed that private companies cut 32,000 jobs during September. The losses were concentrated in service industries, in small and medium-sized enterprises.
This week’s economic indicators also included flat job openings data and a drop in consumer confidence. For markets, they indicate headwinds for economic growth as we go into the last quarter of the year.
With volatile interest rates, mortgage application dropped 12.7% last week from the prior week, based on data from the Mortgage Bankers Association, with refinances driving the shift. Refinance applications slid 21% on a weekly basis.
Real estate markets are moving through the early weeks of fall with mixed signals. On one hand, the inventory of homes for sale has been rising, homes are spending longer on the market, and the share of homes with price cuts is growing. These developments would normally provide good news for people looking for a deal. On the other hand, prices for existing homes remain near record highs and mortgage rates are still elevated, keeping many buyers out of the market.
At a 6.34% mortgage rate, the buyer of a median-priced home of $430,000, who finances it with a 30-year loan and a 20% down payment, is looking at a monthly payment of approximately $2,700, including property taxes and home insurance. The same month in 2024, when home prices were slightly lower and the mortgage rate was 6.12%, the monthly payment was $2,600. For added perspective, especially for homeowners who bought in the last five years and cannot afford to move, during the same week in October 2021, when the median home price was $375,000 and the 30-year fixed rate sat at 2.99%, the monthly payment was $1,770. These numbers underscore the severity of the affordability crisis underpinning today’s housing markets.