As inflation remains high, the Federal Reserve hikes interest rates, and economists predict a recession in the coming months, mortgage rates have hit a 20-year high, indicating that the housing market could be cooling off, along with the rest of the economy.
On Thursday, the average 30-year loan rate increased to 6.92 percent, which is the highest rate since April 2002, Barron’s reported.
“The latest climb has been particularly painful for the housing market, putting homeownership out of reach for many would-be buyers because of the added monthly cost of paying a mortgage at a higher rate,” the Wall Street Journal reported.
Not only have mortgage rates hit a new high, but the increase was rapid.
Last week the rates were 6.66 percent, the Journal reported.
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Now 6.92 percent takes rates even higher than the peak of the previous U.S. financial crisis.
These rate increases come alongside the Federal Reserve’s series of interest rate hikes that it is employing in an attempt to fight the high inflation that the U.S. has been dealing with, USA TODAY reported.
But the fallout of the higher interest rates, which has played a part in the higher mortgage rates, is that the housing market is starting to slow down.
Potential buyers are decreasing in recent months as rising mortgage rates discourage people and make home loans much more difficult, Barron’s reported.
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In just the past three months, the volume of mortgage rate locks has fallen 30 percent. Compared to last year’s levels, locks have fallen 60 percent, the mortgage and data provider Black Knight Inc. reported.
However, while the housing market is taking a serious downturn, unemployment is down and politicians have been hailing that alone as a sign of economic recovery.
In September, the unemployment rate fell to 3.5 percent, Trading Economics reported.
Last week, President Joe Biden hailed the unemployment rate and the number of jobs created.
“Just look at today’s jobs report. Our economy created 263,000 jobs last month. That’s 10 million jobs since I’ve come into office. That’s the fastest job growth at any point of any President in all of American history. Historic progress,” Biden said, according to the White House.
“The unemployment rate remains at historic low — 3.5 percent unemployment. That includes the lowest unemployment among Hispanic Americans ever in the history of this country and the second lowest employment of black teenagers ever,” Biden added.
But others are concerned that while unemployment rates have gotten better, other parts of the economy keep suffering, thus seriously dividing the U.S. economy. The housing market is a prime example of this.
“We continue to see a tale of two economies in the data,” Freddie Mac’s chief economist, Sam Khater, Freddie Mac’s chief economist, said, according to Barron’s.
“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,” Khater added.
Meanwhile, other economists have been predicting overall downfall and a coming recession for the U.S. economy, despite the improved job rates.
On Monday JPMorgan’s CEO Jamie Dimon predicted that the U.S. will be in recession within six to nine months, CNBC News reported.
“It can go from very mild to quite hard and a lot will be reliant on what happens with this war,” Dimon told CNBC. “So, I think to guess is hard, be prepared.”
