Mortgage Rates Cross 7%: How It Affects Wisconsin Real Estate
WISCONSIN — As the Federal Reserve attempts to tame inflation, people in the Badger State looking to purchase a home are facing the highest mortgage rates in 20 years, making it more expensive to buy a home and less profitable to sell one. Rates hit 7 percent recently. The last time the 30-year-fixed-rate was this high was in April 2002. Consumers are getting hit by the higher borrowing costs as inflation reaches to a 40-year-high, making nearly every consumer good more expensive. A year ago around this time, the average 30-year fixed-rate mortgage rate was around 3.14 percent, according to Freddie Mac — the Federal Home Loan Mortgage Corporation.In a report last week, ATTOM Data, a curator of nationwide real-estate data, said that third-quarter seller profits were down 3 percent on median-priced, single-family homes and condos in more than half of 186 metropolitan areas tracked. Mortgage rates stood at above 6 percent at the time the report was released. The report showed that profit margins — or the percentage change between median purchase and resale prices — dropped from 57.6 percent to 54.6 percent across much of the country. Seller profits are still higher than they were a year ago, when margins came in at 48.8 percent.The trend doesn’t hold for the greater Milwaukee area, though. Seller gains in the Milwaukee-Waukesha-West Allis statistical area were up 6.3 percent since last quarter or about 12 percent since this time last year, according to the ATTOM Data report. The increase in seller gains comes as average home prices in the greater Milwaukee area have trended upward by about 16 percent over the past two years.The Commerce Department said in a better-than-expected report Thursday that the economy grew at a 2.6 percent annual rate from June to September, snapping two straight quarters of contraction. The gross domestic product grew after two months of stagnation, and exports and consumer spending were both up, backed by a healthy job market. The Fed has raised interest rates five times this year and is poised to do so again in November and December. Analysts say that has helped tamp down inflation, but is causing upheaval in the housing market. Housing investment plunged at a 26 percent annual pace under the surging interest rates . The third quarter was the sixth in a row to see a drop in residential investment. Construction of new homes is down about 8 percent from a year ago. Many potential homeowners are putting off the decision to buy, waiting “to see where the housing market will end up, pushing demand and home prices further downward,” Sam Khater, chief economist at Freddie Mac, said in a news release. Buyers purchasing a $400,000 home at a 7 percent fixed-rate mortgage would pay about $760 more a month than they did at the end of 2021. That’s about $150 more than last week’s rate, according to Barron’s.
