MW Mortgage rates rise for the fourth week in a row. But in these states, it's still cheaper to buy than to rent.

By Aarthi Swaminathan

There's 'higher-than-normal volatility in mortgage rates, despite a strengthening economy,' Freddie Mac says

Mortgage rates rose for the fourth week in a row, as the market digests strength in the U.S. economy.

The 30-year mortgage rate jumped to the highest level since early August, averaging 6.54% as of October 24, according to data released by Freddie Mac (FMCC) on Thursday.

It's up 10 basis points from the previous week - one basis point is equal to one hundredth of a percentage point.

Rates are still substantially lower than they were in the last year. A year ago, the 30-year was averaging at 7.79%.

The average rate on the 15-year mortgage was 5.71%, up from 5.63% last week. The 15-year was at 7.03% a year ago.

Freddie Mac's weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.

Separate data by Mortgage News Daily said that the 30-year fixed-rate mortgage was averaging at 6.92% as of Thursday morning. The Mortgage Bankers Association's survey noted that the 30-year was at 6.52% as of Oct. 18.

The big picture: The 30-year mortgage rate is heading towards 7% once again, casting a chill on the housing market.

Until the economic data signals a slowing economy which could lead to a policy interest rate cut by the Federal Reserve, rates are expected to stay elevated and even rise through the next few weeks.

Home sales in the meantime are expected to take a hit as mortgage rates climb. Sales of previously-owned homes fell to the slowest pace in 14 years in September. New-home sales fared better that month, as builders are able to throw money at home buyers to make housing costs more affordable.

What Freddie Mac said: "The continued strength in the economy drove mortgage rates higher once again this week," Sam Khater, chief economist at Freddie Mac, said in a statement.

"Over the last few years, there has been a tension between downbeat economic narrative and incoming economic data stronger than that narrative," he added. "This has led to higher-than-normal volatility in mortgage rates, despite a strengthening economy."

What are they saying? "Mortgage rates could stay elevated if there are signs that prices are not cooling as fast as expected,"Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

But "the big picture is for mortgage rates to fall over the coming months, though in the short-term it is very likely for rates to move up and down," she added.

Important context: For consumers trying to decide whether to rent or buy, the former is the cheaper option in most of the 50 states in the U.S., according to an analysis by real-estate data firm CoreLogic provided to MarketWatch.

The company looked at mortgage rates and incomes through July.

Back in January 2020, buying was the cheaper option versus renting in the vast majority of the U.S. But with rates and prices surging over the last few years relative to income, it has become cheaper to rent than to own in most states.

Nonetheless, there were still spots in the U.S. where it was cheaper to buy than to rent. These states include Arkansas, Louisiana, New Jersey, Vermont, and the swing state of Wisconsin, the analysis found.

-Aarthi Swaminathan

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

October 24, 2024 12:03 ET (16:03 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.