US mortgage rates could rise well above the critical 7% threshold after another alarming inflation report for September, according to a prominent economist.
Federal data released Thursday showed inflation came in hotter-than-expected at 8.2% in September. The Federal Reserve is all but certain to raise rates even more in response – a policy move that will see mortgage rates test highs not seen in more than two decades.
Mortgage rates hit a 20-year high this week, with the average 30-year term loan hitting 6.92%, according to Freddie Mac. A looming jump above 7% would remove a key psychological barrier and likely push rates toward a new 8.5% threshold, according to Lawrence Yun, chief economist for the National Association of Realtors.
“Today’s inflation rate report will test that 7% level,” Yun said during a presentation at the National Association of Real Estate Investors in Atlanta on Thursday, according to Bloomberg. “Once it is broken, the next level of resistance is 8.5%, which would mean another major shock to the housing market.”
Yun based his forecast on an analysis of mortgage rate trends, identifying 8.5% as the next key resistance level for the market. In other words, an average mortgage rate of 8.5% is the closest level the market could fall back to in the coming months.
Mortgage rates have more than doubled since the start of the year — exacerbating an affordability crisis that has left many would-be homebuyers waiting for conditions to improve. Property prices have started to fall in many markets, while the volume of mortgage applications and other housing activity has slowed.
“Once an army makes a breakthrough, there is huge progress,” Yun said of mortgage rates, according to Bloomberg.
Earlier this week, Freddie Mac’s chief economist Sam Khater noted that mortgage rates are at their highest since April 2002, noting that “the next few months will undoubtedly be important for the economy and the housing market.”
“We continue to see a tale of two economies in the data: strong job and wage growth is keeping consumer balance sheets positive, while persistent inflation, recession fears and housing affordability are driving housing demand precipitously lower,” Khater said.
Senior Fed officials, including Chairman Jerome Powell, have noted that a significant housing market slowdown is underway as interest rates rise.
https://nypost.com/2022/10/14/us-mortgage-rates-could-surge-to-8-5-as-inflation-rages-economist/ US mortgage rates could rise to 8.5% as inflation rages: economist