Mortgage Market News: The Week of May 16, 2023

Keeping you updated on the latest mortgage and real estate market news, Homefinity is proud to be your partner in understanding U.S. homebuying data.

We’ve scoured the web for the most important news you need to know. 

As of Tuesday, May 16, 2023, the average 30-year fixed mortgage interest rate was 6.91%, up four basis points from a week ago. 

For homeowners seeking to refinance, the national 30-year refinance interest rate sat at 7.07%, up six basis points since the same time last week. 

Meanwhile, the average 15-year refinance interest rate went up to 6.33%, an increase of four basis points compared to the same time the previous week. 

Home buying costs could soar 22% if the U.S. defaults on its debt

Zillow recently released new projections which theorized how a debt default could cause a considerable dive in sales due to a surge in mortgage costs.

If the U.S. government defaults on its debt—as early as June 1—mortgage rates could rise to 8%, resulting in a 22% increase in the typical cost of a mortgage. Such a situation could make purchasing a home more difficult for prospective homeowners.

Zillow emphasized that it’s highly improbable that the United States will not meet its debt obligations and that their study was just a hypothetical assessment of what could happen if a long-term default were to occur. 

Homebuyers coming to terms with higher rates

This spring, home buyers and sellers have been gradually accepting mortgage rates higher than 6%, according to Zillow senior economist Jeff Tucker. 

He added that a debt default could push borrowing costs even higher, leading to a drastic decrease in market activity. 

Home values may not suffer a huge dip. However, Tucker believes that if mortgage rates rise, it will become increasingly difficult for first-time buyers to afford a home, making it essential that lawmakers find a solution so as not to put extra strain on those striving to become homeowners.

Zillow anticipates that the combined effects of both buyers and sellers withdrawing will cause almost one-fourth of the projected sales to be eliminated in certain months. 

If a debt default were to occur, the most significant predicted shortage would be in September, with a forecast of 23% reduced existing house sales.

American’s views on the housing market reach new depths

According to a recent Gallup poll, fewer Americans now than ever before believe it is a good time to buy a house (21%). 

The past two years are the only times the polling company has found less than half of Americans being positive about a home purchase in the prevailing housing market. 

Americans’ pessimism about homebuying, they say, reflects the high prices and high-interest rates that have been prevalent for the last two years. The survey suggests these attitudes might keep many new homebuyers out of the market.

At the same time, the poll indicated that Americans still think real estate is the best long-term investment—beating out stocks, gold, and other options.