Thursday, October 12, 2023 – U.S. mortgage rates have climbed for the fifth successive week amid market and geopolitical uncertainty, reaching an average of 7.57% for a fixed 30-year mortgage, the highest level since late 2000, according to Sam Khater, Freddie Mac ‘s chief economist. This marks a 0.08 percentage point increase from last week’s average of 7.49%.
Despite robust economic and income growth, significant affordability issues continue to plague the housing market, resulting in a three-decade low in purchase demand. The surge in home prices coupled with escalating mortgage rates has deterred many potential buyers. Yet, those relocating from high-cost areas to more affordable regions remain active participants in the market.
In the context of the current market, Freddie Mac (FMCC (OTC:)) has shown some interesting financial metrics. According to real-time data from InvestingPro, Freddie Mac has a market cap of 2020M USD, with a P/E ratio of 74.58, indicating a high valuation compared to earnings. The company has also demonstrated a significant return over the last three months, with a 40.23% increase in price. This aligns with an InvestingPro Tip that highlights the company’s strong return over the same period.
In addition to this, there has been a notable rise in applications for adjustable-rate mortgages (ARMs), with a 15% application surge last week as buyers seek to decrease their short-term monthly payments amidst rates exceeding 7%. Bob Broeksmit, president of the Mortgage Bankers Association, pointed out that the average interest rate on 5/1 ARMs was at a considerably lower 6.33% last week.
The PMMS survey by Freddie Mac focused on conventional home purchase loans for borrowers who put down 20 percent and have excellent credit. It revealed that the 15-year fixed-rate mortgage (FRM) also increased to an average of 6.89 percent from last week’s 6.78 percent.
Lawrence Yun, the National Association of Realtors’ chief economist, expects mortgage rates might reach 8% soon and stay at that level through the end of the year. Freddie Mac continues to promote liquidity, stability, affordability, and equity in the housing market through all economic cycles since 1970. This commitment is reflected in the company’s high earnings quality, with free cash flow exceeding net income, as pointed out by another InvestingPro Tip.
Freddie Mac’s Chief Economist Sam Khater has been closely monitoring these trends and can provide further insights. Angela Waugaman, a representative of Freddie Mac, is also available for additional information at (703)714-0644 or [email protected]. Freddie Mac maintains a strong presence across various social media platforms.
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