Will US Home Prices Rise Further This Year? Sighs Over Soaring Mortgage Rates

Effective Mortgage Interest Rate 7.32%
7% as the Threshold for Homebuyers' Purchase Sentiment
"Housing Market Transactions to Freeze This Year"

As expectations for a Federal Reserve (Fed) interest rate cut retreat, U.S. mortgage rates are soaring. There is a growing outlook that existing homebuyers will not put their properties on the market this year due to prolonged high interest rates. Concerns are also emerging that housing prices could continue to rise due to a shortage of housing supply.

On the 17th (local time), the Mortgage Bankers Association (MBA) reported that the average 30-year fixed mortgage rate in the U.S. rose by 0.12 percentage points from the previous week to 7.13%. The effective interest rate applied when borrowers actually take out loans was 7.32%.

Bloomberg explained that the rise in mortgage rates was driven by Fed Chair Jerome Powell's recent remarks that inflation indicators were stronger than expected, requiring more patience in deciding the timing of interest rate cuts.

In the U.S. housing market, a mortgage rate of 7% typically represents a psychological barrier for homebuyers. However, despite high interest rates, mortgage applications increased by 5% compared to the previous week last week. This marks a rebound after five weeks. The dominant analysis is that this is a temporary phenomenon due to factors such as refinancing triggered by the maturity of existing loans.

Since the 10-year Treasury yield hit its highest level since November last year, mortgage rates are expected to continue rising for the time being. Mortgage News Daily predicted that the 30-year mortgage rate could soon reach 7.5%.

There is growing anticipation that the U.S. housing market will freeze this year as well. If high interest rates persist, existing homeowners who purchased homes with long-term fixed rates during low interest periods tend to avoid switching to new loans, thus refraining from putting their properties on the market.

As the housing inventory shortage continues, there are also forecasts that soaring housing prices could rise further. Bloomberg noted, "It will take more time for the residential real estate market to recover."