The chief economist for mortgage backer Freddie Mac says interest rates have hit their highest level in a generation and will continue to slow the housing market for the foreseeable future.
Sam Khater made the statement Thursday as Freddie Mac released its Primary Mortgage Survey for the first week of October. The report showed interest rates for a 30-year mortgage had reached an average of 7.49%, up from 6.66% percent a year ago and 2.99% during the first week of October in 2021.
According to a Freddie Mac spreadsheet tracking interest rates since 1971, the last time the average 30-year rate was this high was the final full month of Bill Clinton’s presidency. On Dec. 8, 2000, the average rate was 7.54%. It dropped to 7.42% the following week and had not reached that Dec. 8 level again until now.
Khater says in the statement that there are numerous factors causing the spike, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move. All, he says, “are contributing to the highest mortgage rates in a generation.”
The pinch is being felt across the commercial real estate market where brokers and developers across Florida say projects are stalling and it’s getting more difficult to pencil deals that make sense.
But the housing market is getting hit hard as well.
According to Florida Realtors, closed sales of single-family homes were down almost 8% in August when compared with last year. Town homes and condos were down more than 7%.
Brad O’Connor, an economist with the trade group, says in a presentation that “mortgage interest rates continue to be the most dominant factor in sales trends here in Florida as well as the rest of the U.S., so the continued year-over-year declines we're seeing in closed sales are not terribly surprising.”
The Freddie Mac survey released Oct. 5, shows that the 7.49% average fixed-rate mortgage rate is up from 7.31% last week and up from 6.66% a year ago.
As for the average 15-year-fixed rate mortgage rate, it is 6.78%, up from 6.72% last week and 5.9% a year ago.