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U.S. Mortgage Rates Climb to Six-Month High, Threatening Housing Market Recovery

Mortgage rates in the United States reached their highest level in six months, raising concerns that a recent uptick in home sales may be short-lived. Freddie Mac reported on Thursday that the average rate for a 30-year fixed mortgage increased to 6.91%, up from 6.85% the previous week. This is the highest rate since early July and represents a sharp increase from the 6.62% average recorded during the same period last year.

“Compared to this time last year, rates are elevated and the market’s affordability headwinds persist,” said Sam Khater, Freddie Mac’s Chief Economist.

U.S. Mortgage Rates Climb to Six-Month High, Threatening Housing Market Recovery

Rising Rates Persist Despite Federal Reserve Cuts

The increase in mortgage rates comes despite the Federal Reserve’s three interest rate cuts since September, which marked the start of its monetary easing cycle. The rise has mirrored upward trends in U.S. Treasury yields, fueled by an unexpectedly resilient economy and investor concerns about inflation.

Market observers point to President-elect Donald Trump’s proposed policies, including tax cuts, higher tariffs on imports, and mass deportations, as potential inflationary drivers. Mortgage rates, which typically follow the trajectory of the 10-year Treasury note, have risen as a result.

Home Sales Surge but Could Be Short-Lived

Sales of previously owned homes climbed to an eight-month high in November, largely reflecting contracts signed in the earlier months of October and September, when mortgage rates were comparatively lower. November also saw contracts rise to a 21-month high, suggesting sales may remain strong in December.

However, rising rates could deter some homeowners from listing their properties, particularly those with mortgages locked below 5%. This so-called rate-lock effect could lead to fewer homes on the market, further limiting inventory and driving up prices.

Affordability Challenges Loom

The combination of rising home prices and elevated mortgage rates is expected to weigh heavily on affordability, creating challenges for prospective buyers. While increased inventory in some areas has encouraged buyers, the sustained rise in rates could dampen enthusiasm.

For now, the housing market sits at a crossroads, with potential gains in supply clashing with affordability constraints that threaten to undermine the recovery.

Discuss in The Ken dot Live Forums: https://forum.theken.live/threads/mortgage-rates-hit-6-91-guess-whos-not-buying-a-house-anytime-soon.37/

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