Freddie Mac's weekly average now sits above every reading of the past year, and homebuilder shares touched a 52-week low. The agency's chief economist still describes housing as supported by the economy.
The bond market's September sell-off has reached the kitchen table.
The average rate on a 30-year fixed mortgage rose to 7.28% this week from 7.03%, Freddie Mac said Thursday, an increase of 25 basis points. A year ago it was 6.34%. The 15-year rate rose to 6.60% from 6.42%, against 5.55% a year earlier.
Before this week, the 30-year average had ranged between 5.98% and 7.03% over the prior 52 weeks. The new reading is above every one of them.
What it costs
On a $400,000, 30-year loan, monthly principal and interest comes to about $2,737 at 7.28%, compared with about $2,669 at last week's 7.03%. That is roughly $68 a month more, or about $820 a year. Against the year-ago rate of 6.34%, the same loan costs about $251 more each month.
The mortgage average tracks the 10-year Treasury yield, which closed Wednesday near 5.29%, its highest since 2002. That leaves the 30-year mortgage about 2 percentage points above the benchmark. Freddie Mac's survey averages applications from Thursday through Wednesday, so this week's figure captures little of Thursday's retreat in yields.
The builders
Homebuilder shares took the news badly at first. The iShares U.S. Home Construction ETF fell as low as $84.81 on Thursday, a 52-week low, before recovering to about $86.74, down 0.3%, by early afternoon.
The other side of the ledger
Freddie Mac's chief economist, Sam Khater, put the jump in a broader frame. "With mortgage rates on their current trajectory, the housing market continues to be supported by favorable economic conditions," he said.
The data released Thursday backed part of that. First-time jobless claims fell to 197,000, near the low end of their range. Construction spending rose 0.9% in August, well above expectations.
Two readings
One reading is that the rate shock is now hitting affordability. A borrower who locked a year ago pays about $250 a month less than one locking today, and builder shares at a 52-week low show investors pricing that in.
A second reading is that a job market this firm can absorb higher rates for a time. Few workers are being let go, construction spending is still rising, and the agency that publishes the number describes conditions as supportive.
The next print
Next Thursday's survey will show whether this week's retreat in Treasury yields carries into mortgage pricing. A reading back under 7.1% would suggest the spike tracked a few bad days in bonds. Another weekly increase would leave borrowers facing rates above 7.25% heading into the fall selling season.