Last week, the average mortgage rate (30-year loan) moved up three basis points to a four-year high of 4.46%, continuing the recent trend and clocking much above its 30-year average.
Though it is believed that many families who plan to own a house would defer their purchase until the rate moderates, market watchers in general rule out the mortgage rate having a noticeable impact on sales. Substantiating their argument, economists claim that the housing sector remained broadly stable over the past four decades, during which period the cumulative growth in mortgage rates was just 1%.
Ironically, it might be for the same reasons that homebuilders’ sentiment brightened significantly last month and reached the highest level since 1999. The survey that revealed the upbeat mood also showed that builders continue to expect strong demand for residential properties. For them, the significant hassles are the shortage of workers and building materials.
Sales of residential units fell at the fastest pace in more than four years. The reason could be a combination of high home prices that grew faster than wages, and lack of adequate supply.
But, multiple economic indicators paint a bleak picture. Reports that came out at the beginning of the year showed home affordability was already under severe pressure.
Consequently, sales of residential units fell at the fastest pace in more than four years. The reason could be a combination of high home prices that grew faster than wages, and lack of adequate supply.
People’s propensity to invest in houses is sure to take a further beating from high mortgage rates. Interestingly, unlike in the past, the most recent rate hike was not proportional to the changes in inflation and treasury yields.