As the Federal Reserve prepares to announce its latest interest rate hike, possibly by as much as 75 basis points, mortgage rates are soaring and expected to continue to move higher.
The average rate offered for a conventional 30-year fixed mortgage jumped to 6.51% on Tuesday and is now over 1 percentage point higher than it was two weeks ago, according to data collected by Investopedia's sister site, The Balance.
Rising rates are taking a toll on the housing market, with home sales falling for six straight months, according to the National Association of Realtors. However home prices have continued to hit record highs, increasing over 20% in March from a year ago, according to the latest S&P CoreLogic Case-Shiller Index report. This marked the strongest increase in the history of the report.
Real estate brokerage Redfin announced it was laying off about 470 employees after May demand came in 17% below expectations. Real estate firm Compass also said it was laying off about 450 workers. Redfin (RDFN) shares are down almost 80% this year, while shares of Compass (COMP) are down over 55%.
Tomorrow, the Census Bureau will release new home construction data for May. Economists are projecting housing starts to slip to 1.72 million units, slightly below April starts.
"The U.S. housing market's slowdown coincides with a 20% rise in homeowner equity to a record high of $27.8 trillion. While that's good news for homeowners, rising mortgage rates will make them think twice about tapping their homes for equity to spend on other goods and services," said Caleb Silver, Editor in Chief of Investopedia.