Hotter-than-expected inflation readings in recent months are now keeping the Federal Reserve from cutting interest rates anytime soon
Home sales based on contract signings unexpectedly jumped in March despite elevated mortgage rates that month. And the latest data from Freddie Mac showed that mortgage rates edged higher this week, reaching a fresh five-month high.
The broader US housing market began the year with some momentum, as home sales climbed, homebuilder sentiment improved and traders priced in several interest rate cuts this year. Now, the narrative has shifted. “Pending home sales probably will drop back significantly over the next couple of months. Sales cannot defy weaker mortgage demand indefinitely, and applications have continued to soften in April,” Oliver Allen, senior US economist at Pantheon Macroeconomics, wrote in a note Thursday.
The median US home price was $393,500 last month, up 4.8% from a year earlier and the highest level since August 2023. It was also the highest March price on record. S&P Global releases a comprehensive index of home prices across the country next week and that one reached a record high in January. Those are the so-called “golden handcuffs” of low mortgage rates. They began to climb in early 2022 when the Federal Reserve started to hike interest rates in a bid to tamp down high inflation. Homeowners have opted to stay put, but life events such as marriage, divorce, and new children could force some of them to give up on waiting for mortgage rates to decline and sell their home, Yun has said.Mortgage rates continue to rise The 30-year fixed-rate mortgage averaged 7.
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