Mortgage rates highest in 21 years

Mortgage rates hit

7.09% last week, the highest level in 21 years in yet another blow to Southern California’s already depressed homebuying affordability.

My trusty spreadsheet reviewed Freddie Mac’s weekly report on the average 30-year, fixed-rate mortgage.

After a springtime dip, rates have risen across financial markets this summer. The main culprit is a stern Federal Reserve that’s willing to keep all interest rates high to make sure problematic inflation won’t return.

Last November, mortgages hit their last peak of 7.08% as the Fed’s attempts to cool an overheated economy took full force. But as inflation began to slide from a fourdecade high of 9%, fears ballooned about a possible recession. The Fed’s chore was done, right?

So mortgages fell to 6.09% by February.

And though inflation has cooled even further, there’s plenty of evidence the economy remains resilient, at a minimum. That strength in the business climate has pushed rates back up to a new cyclical peak.

How long ago?

Let’s jog your memory …

APRIL 2002 NEWS >> President George W. Bush was dealing with Middle East tensions. Venezuelan dictator Hugo Chavez survived a two-day coup. Gray Davis was elected California governor. A school shooting in Germany killed 16.

APRIL 2002 CULTURE >> The top-rated TV show was “ER,” and tops at the box office was “Scorpion King” featuring Dwayne “The Rock” Johnson. The No. 1 song was “In the End” by Linkin Park. Golfer Tiger Woods won the Masters tournament. The pro basketball playoffs began, eventually won by the Lakers. And the baseball season eventually would see the Anaheim Angels win the World Series.

The back story

What’s behind the “last time this big”?

In April 2002, a mild recession tied to the dotcom stock market collapse and the 9/11 terrorist attack had just ended. So the Fed began lowering rates — mortgages had been as high as 8.6% in 2000 — after winning that era’s inflation war (from nearly 4% down to 1.2%).

California’s economy also was shaky. Unemployment statewide was 6.8%. (It was 4.6% in June 2023.)

The result

Today’s house hunter faces high mortgage rates plus stubbornly lofty home prices. The Southern California six-county median sales price is just $20,000 below its record $750,000 set in April 2022.

Ponder what this means to local monthly payments.