Mortgage Rates Hit 7-Year High
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MIAMI (CBSMiami/CNN) -- Need more evidence that the economy is booming? Mortgage rates just topped 5%.
The Mortgage Bankers Association said this week the average 30-year fixed home loan rate hit 5.05% -- the highest since February 2011. And federal mortgage buyer Freddie Mac said rates for a 30-year fixed mortgage are now at 4.9%, also more than a seven-year high.
Mortgage rates are climbing thanks to a healthy economy. The unemployment rate is at its lowest level in nearly half a century and wages are rising. Consumers are spending and businesses are investing.
That's led the Federal Reserve to nudge up short-term interest rates, and longer-term bond yields that help influence mortgage rates have climbed in the process.
The rise in mortgage rates is just another part of a new markets cycle: Interest rates are rising, and stock investors are taking risk out of their portfolios.
Although those can be cautionary signs, they're in response to strong economic factors. The Fed is raising rates to ensure the economy doesn't overheat.
But now that mortgages have breached the 5% level, will that scare away prospective buyers?
Rates are still relatively low. The average 30-year mortgage rate was hovering around 6.5% in 2007 -- before the epic housing market collapse that helped lead to the Great Recession.
But housing prices are starting to cool off in many markets around the country. Prices aren't rising as quickly in New York, Chicago and Washington.
And according to a recent report from Zillow, prospective sellers have even been forced to cut prices in some markets that were once red hot, such as San Diego, Portland and Dallas.
Buyers seem wary of paying too much, especially now that a mortgage will cost them more.
That may be taking their toll on homebuilders. D.R. Horton (DHI) said earlier this week that it expected home sales for this year to be below Wall Street's forecasts. Lennar (LEN) recently cut its orders outlook too.
Freddie Mac added last month that "the housing market has essentially stalled."
And it may not improve anytime soon. Freddie Mac said that it now expects overall home sales (both new and existing) to fall nearly 1% this year, mainly due to a lack of affordable houses on the market and higher mortgage rates.
(© Copyright 2018 CBS Broadcasting Inc. Cable News Network, Inc., a Time Warner Company, contributed to this report).
