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The average rate on the benchmark 30-year fixed mortgage rose again this week to the highest level since 2001, spelling even more pain for buyers in a market where housing affordability is already at an all-time low.

Freddie Mac’s latest data released Thursday shows the average rate for a 30-year fixed note has climbed to 7.23%, marking a second consecutive multi-decade record after last week’s average reached 7.09% for the first time since 2002.

At this time last year, the 30-year fixed rate averaged 5.55%.

The rate on a 15-year fixed mortgage is also up, averaging 6.55% after coming in last week at 6.46%. One year ago, the rate on a 15-year fixed note averaged 4.85%.

MORTGAGE DEMAND FALLS TO LOWEST LEVEL SINCE 1995 AS RATES SURGE

Freddie Mac chief economist Sam Khater signaled in a statement that rates are not expected to fall any time soon, saying “indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term.”

The Federal Reserve’s aggressive interest-rate hike campaign sent mortgage rates soaring last year, and homeowners who locked in a low mortgage rate before the pandemic have been reluctant to sell and jump into a higher rate on a new property, leaving few options for buyers.

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“As rates remain high and supply of unsold homes woefully low, incoming data shows that existing homes sales continue to fall,” Khater said. “However, there are slightly more new homes available, and sales of these new homes continue to rise, helping provide modest relief to the unyielding housing inventory predicament.”

Realtor.com chief economist Danielle Hale said recent data on housing has been mixed, with existing home sales dropping last month while new home sales and construction both picked up. But there are signs more would-be buyers are giving up on purchasing a home right now.

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“As rates have surged past 7% and homebuying costs have risen yet again, home purchase mortgage applications have eased, suggesting that at least some potential buyers have been shut out of the market,” Hale said in a statement. “Furthermore, as rents notch a third month of decline, hopeful first-time home buyers may have more reasons to take their time or extend their lease, rather than rushing in a challenging and expensive market.”

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All eyes will be on Federal Reserve Chair Jerome Powell when he delivers the keynote speech at the central bank’s summer symposium in Jackson Hole, Wyoming, on Friday.

Just one year ago, when Powell spoke during this same time, he sent the stock market careening with warnings of economic “pain” that might result from the Fed’s relentless fight against inflation.

“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

Instead, inflation has shown mostly steady signs of declining, falling from a peak of 9.1% to 3.2% over the past year – even as the labor market has remained surprisingly resilient. 

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Now, upon Powell’s return to the annual consort of central bankers in the Wyoming resort town, investors will be closely analyzing his speech clues about what comes next in the Fed’s inflation fight. The Fed chief may disappoint onlookers who are hoping for signs that the aggressive tightening campaign is finally coming to an end. 

“Powell will leave the door open for another rate hike, and [repeat that] future decisions will remain data dependent,” said Joe Kalish, chief global macro strategist at Ned Davis Research. “With another batch of economic reports due before the next FOMC meeting, there is no need for him to tip his hand. The big debate will be how long the Fed will remain restrictive. In the meantime, the Fed will keep with a tightening bias.” 

A FED PAUSE LIKELY WON’T HELP STRUGGLING CONSUMERS

The Fed is scheduled to meet three more times this year, in September, November and December. While most investors agree the central bank will hold rates steady at the upcoming September meeting, there is a growing expectation among traders that the Fed will approve another rate hike in November, according to the CME Group’s FedWatch tool, which tracks trading. 

Government data released earlier this month showed that inflation ticked higher in July; it marked the first acceleration in the headline figure in more than a year, underscoring the challenge of taming high inflation.

Other parts of the report also pointed to a slower retreat for inflation. Core prices, which exclude the more volatile measurements of food and energy, climbed 0.2%, or 4.7% annually. Both core and headline inflation remain well above the Fed’s 2% target rate.

Powell will likely express concerns about “inflation not falling fast enough” and indicate that the “market should not expect any cuts through at least the first part of 2024,” according to John Vail, chief global strategist at Nikko Asset Management.

ECONOMISTS STILL SEE 50% CHANCE OF A RECESSION THIS YEAR

Policymakers have raised interest rates sharply over the past year, approving 11 rate hikes in hopes of crushing inflation and cooling the economy. In the span of just 16 months, interest rates surged from near zero to above 5%, the fastest pace of tightening since the 1980s. 

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Hiking interest rates tends to create higher rates on consumer and business loans, which then slows the economy by forcing employers to cut back on spending. 

Higher rates have helped push the average rate on 30-year mortgages above 7% for the first time in years. Borrowing costs for everything from home equity lines of credit, to auto loans and credit cards have also spiked.

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The Federal Aviation Administration (FAA) will invest millions of additional funds to modify airports nationwide with the goal of reducing the risk of close-call incidents. 

The FAA gave more than $121 million in grants to airports so that they can make adjustments to existing airfields. These modifications include reconfiguring taxiways that may cause confusion, installing new lighting systems and providing more flexibility on the airfield, according to the agency. 

It’s part of the FAA’s ongoing goal of zero serious close calls. The agency has eyed this goal after several close calls occurred earlier this year, including incidents involving aircraft at John F. Kennedy Airport in New York, as well as in Austin, Texas, and off the coast of Hawaii. 

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“The FAA is serious about ending runway incursions and we are putting substantial resources behind our efforts,” said Shannetta Griffin, the FAA’s associate administrator for airports. 

The best way to address safety risks, in some cases, is by “modifying or reconfiguring existing airfields – these grants directly address those situations,” according to Griffin. 

Earlier this week, the FAA also pledged to hold runway safety meetings at 90 major airports through September as part of its ongoing effort to prevent close calls between aircraft.

FAA ISSUES SAFETY ALERT TO AIRLINES AND PILOTS AFTER ‘CONCERNING’ NEAR-MISS INCIDENTS

During these runway safety action team meetings, representatives from the FAA and airports will work to identify unique airport-specific risks and develop plans to mitigate or eliminate them. 

The people involved in these discussions include representatives from the FAA Air Traffic Organization, airlines, pilots and airport vehicle drivers, the agency said. 

The FAA has been taking a series of actions to eliminate close calls since the safety summit in March, where more than 200 safety leaders from across the aviation industry discussed ways to enhance flight safety. 

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Most recently, the FAA said it addressed another concern that officials 1,500 air traffic controllers and “met its 2023 goal needed to continue rebuilding its training pipeline.” 

Now, the FAA has approximately 2,600 controllers nationwide who are in the middle of being trained. 

The lack of fully certified air traffic controllers was another thing that “poses a risk to the continuity of air traffic operations,” according to a report from the Department of Transportation’s Office of the Inspector General.

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