Mortgage rates top 6%, cooling domestic Bay Area market

Mortgage rates soared above 6% this week for the first time since 2008, throwing more cold water on the Bay Area housing market as buyers face soaring repayments monthly home loans.

The average rate for a 30-year fixed-rate mortgage was 6.02% on Thursday, down from 5.89% last week, Freddie Mac reported. This is more than double the average rate of 2.86% this time in 2021.

A non-conforming 30-year fixed home loan, meanwhile, averaged 6.19% on Thursday after hitting 6% last week, according to Bankrate.com. A nonconforming loan, also known as a “jumbo” loan, in the Bay Area is a mortgage that exceeds $970,800.

Since the Federal Reserve began raising the cost of borrowing in March in an effort to curb inflation, mortgage rates have risen accordingly, squeezing many buyers out of the housing market and cooling the record pandemic housing market in the Bay Area.

In July, the median price of existing single-family homes in the area fell 6% from June to $1.28 million, according to the latest data from real estate analytics firm CoreLogic.

“While rising rates continue to dampen demand and put downward pressure on home prices, inventory remains insufficient,” Freddie Mac chief economist Sam Khater said in a statement. “This indicates that while the decline in house prices is likely to continue, it is not expected to be significant.”

Last week, mortgage applications fell 1.2% from the previous week and 29% from a year ago, according to data from the Mortgage Bankers Association.

While consumer prices remained stubbornly high in August, the Federal Reserve announced that it would raise its federal funds rate again this month to rein in inflation, likely pushing mortgage rates even higher.