March saw the largest monthly drop in existing home sales in over a year, the National Association of Realtors reported on Thursday.
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The 30-year fixed-rate mortgage just broke 7% for the first time this year, shooting up from 6.88% to 7.10% this week, according to government-sponsored mortgage finance giant Freddie Mac.
That marks the highest rate since November 2023 and the biggest weekly surge in almost a year.
Meanwhile, the 15-year fixed-rate mortgage spiked to 6.39% from last week's 6.16%, marking a significant uptick from 5.76% a year ago.
The sudden spike comes as markets adjust expectations for interest rate cuts this year after inflation appears stuck well above the Federal Reserve's 2% target. The consumer price index clocked in at 3.5% year-over-year in March.
The rise in borrowing costs has dashed hopes for owners looking to refinance their mortgages and continues to keep sellers from listing their homes, extending the so-called lock-in effect.
To that point, March saw the largest monthly drop in existing home sales in over a year, according to a report from the National Association of Realtors on Thursday. A 4.3% plunge from February flags the biggest percentage decline since November 2022.
"As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year," Freddie Mac's chief economist Sam Khater said in a statement.
However, purchase mortgage applications rose by 5% for the week, data from the Mortgage Bankers Association shows, but Khater said it remains unclear how many prospective homebuyers can withstand rising rates before they head back to the sidelines.
Chen Zhao, Redfin's economic research lead, pointed out that some house hunters are rushing to buy now because of fears over even higher rates down the road, while others have adjusted their home-price budgets to accommodate higher borrowing costs.
"Home sales are slower than usual, but there are still people buying and selling because if not now, when?" Connie Durnal, a Redfin premier agent in Dallas said in a report from the real estate group.
"I've had a few prospective buyers touring homes for the last several years, since mortgage rates started going up, and they wish they would have bought last year because prices and rates are even higher now. My advice to them: If you can afford to and you find a house you love, buy now. There's no guarantee that rates will come down soon."
The recent uptick in rates has undeniably thrown a wrench into home transactions, Matthew Graham, COO at Mortgage News Daily, said on CNBC. Despite rates being lower than last October, the latest rise above 7% is still a significant roadblock.
"I don't want to jinx it and say we're at rock bottom because things can always get worse in some way, but not a whole lot worse than they are right now," Graham said.
