Mortgage rates surge to a 20-year high, leading to steep decline in home sales

Rates are up 2 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%. 

Last week, the 30-year was at 6.92%. Last year, the 30-year was averaging at 3.09%

It’s worth noting that Mortgage News Daily, which follows day-to-day movement in mortgage rates, is noting that the 30-year is at 7.22%.

The average rate on the 15-year mortgage rose to 6.23%. 

“Mortgage rates slowed their upward trajectory this week,” Sam Khater, chief economist at Freddie Mac
FMCC,
-1.75%,
said in a statement.

“The 30-year fixed-rate mortgage continues to remain just shy of 7% and is adversely impacting the housing market in the form of declining demand,” he added.

Existing home sales, for instance, continue to fall for the eight straight month, the National Association of Realtors said on Thursday. They fell 1.5% to a seasonally adjusted annual rate of 4.71 million in September. The last time they fell to this level was May 2020.

What’s more, the number of homes sold last month fell 25% year-over-year, and new listings fell 22%, Redfin 
RDFN,
+2.29%
 said Wednesday. Those were the biggest decreases on record with the exception of the early months of the pandemic, Redfin said.

“The U.S. housing market is at another standstill, but the driving forces are completely different from those that triggered the standstill at the start of the pandemic,” Redfin economics research lead Chen Zhao said in a statement.

“Additionally, homebuilder confidence has dropped to half what it was just six
months ago and construction, particularly single-family residential construction,
continues to slow down,” Khater added.

The adjustable-rate mortgage averaged 5.71%, down from the prior week. 

Put off by the high rates, buyers’ apprehension has pushed mortgage applications down to the lowest since 1997, the Mortgage Bankers Association said.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
4.204%
rose above 4.17% in morning trading on Thursday, suggesting that rates may likely move up further.

Diane Swonk, chief economist at KPMG U.S. wrote on Twitter
TWTR,
-4.86%
: “The path ahead is difficult and what I was called the canary in the coal mine, housing, appears to be sending an ominous signal about where we are and where we are going. Hard.”

(Bill Peters contributed to this report.)

Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]