The Blubber

The average 30-year mortgage rate is back above 7%, at 7.09%.

The U.S. Department of Housing and Urban Development reported that the national median family income for 2023 was $96,300, while the National Association of Realtors stated that the median price of an existing home sold in December 2023 was $382,600. Assuming a 20 percent down payment and a 7.13 percent mortgage rate, the monthly payment of $2,063 accounts for 26 percent of the average family's monthly income.

Regarding the direction of mortgage rates, Greg McBride, CFA, chief financial analyst at Bankrate, commented, “The disappointing Consumer Price Index reading administered a dose of interest rate reality to investors — the Fed will be slow to cut rates and it won’t happen right away. This means interest rates staying higher for longer than was hoped, so bond yields and mortgage rates are recalibrating.”

In October, the average rate on 30-year home loans surpassed 8 percent. Rates fell back below 7 percent in December following the Federal Reserve's announcement of its plan to cut rates in 2024. However, the central bank kept rates unchanged in January, and with the latest inflation data, it seems less likely that the central bank will reduce rates in the near future.

It's important to note that the Fed does not directly set mortgage rates; rather, they are influenced by investor demand, particularly for 10-year Treasury bonds, which serve as a key indicator for fixed mortgage rates. Mortgage rates can experience significant fluctuations, rising on news of Fed rate hikes and falling in anticipation of rate cuts.

Mortgage rates are also tied to inflation, a factor the Fed is working to manage. Despite this, loan applications fell by 10.6 percent this week, according to the Mortgage Bankers Association, as home prices remain high and many markets face a shortage of listings.

Mike Fratantoni, chief economist at the MBA, remarked, “Potential homebuyers are quite sensitive to these rate changes, as affordability is strained with both higher rates and higher home values in this supply-constrained market.” Nonetheless, a record number of c