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Following the trend of the bond market, mortgage rates rose above 6.5% this week. According to Freddie Mac, the average rate on a 30-year fixed mortgage picked up to 6.57% from 6.39% the previous week. Although there are rising concerns about the state of the economy as the debt ceiling deadline is approaching, investors remain optimistic that the country will come through it.
While the housing market continues to recover with home sales activity above its recent cyclical lows, these rising rates keep affordability low. However, this isn't something new. A year ago, last May, was the first time since 1990 that the housing affordability index was below 100. This means that the typical American family wasn't earning enough to qualify for a mortgage on a median-priced home. Even though home prices have dropped slightly since then, these higher mortgage rates continue to keep many buyers out of the market.
