Stock Market Cafe
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
No Result
View All Result
Stock Market Cafe
No Result
View All Result
Home Trading News

‘The pandemic boom in home sales is over’: Mortgage rates soar to highest level since 2009 as the Fed pressures the housing market

by
May 5, 2022
in Trading News
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

Mortgage rates are skyrocketing thanks to the Fed, but buyers who can tough out this difficult, changing market will be rewarded.

The 30-year fixed-rate mortgage averaged 5.27% for the week ending May 5, according to data released by Freddie Mac 
FMCC,
+3.24%

on Thursday. That’s up 17 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%.

RELATED POSTS

30-Year Mortgage Rates Spike, Entering 8% Range

‘Kill Black people’: Elon Musk’s Tesla sued for racial abuse at electric vehicle plant

This represents the highest point for the benchmark 30-year mortgage product since August 2009. To put that in context: The last time mortgage rates were this high Barack Obama was just months into his first term as president, the nation was in the depths of the Great Recession and Instagram had yet to be launched.

The average rate on the 15-year fixed-rate mortgage rose 12 basis points over the past week to 4.52%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.96%, up 18 basis points from the prior week.

Mortgage rates are roughly benchmarked to the yield on the 10-year Treasury note
TMUBMUSD10Y,
3.043%
.
But the difference between the average rate on the 30-year mortgage and the 10-year Treasury has widened recently.

Since the end of the Great Recession, the spread between the two has averaged 1.7 percentage points, but currently it hovers above 2%. If the spread were closer to historical levels, the 30-year fixed-rate mortgage would still be below 5%.

The Federal Reserve is largely to blame for the fact that mortgage rates increased at a faster pace than might otherwise be expected, according to analysis from Odeta Kushi, deputy chief economist at title insurer First American
FAF,
-2.37%
.
Investors who buy mortgage-backed securities have already factored in expectations that the Federal Reserve will continue to raise rates throughout this year into their view on the mortgage market.

Lenders, consequently, must hike the rates they offer consumers so that they can continue to sell their loans to investors — those sales are what generates the funds used to produce more mortgages.

“While some additional Fed tightening is already baked into today’s average mortgage rates, ongoing inflationary pressure remains likely to push mortgage rates even higher in the months to come,” Kushi said.

Hiking short-term interest rates isn’t the only way the Fed influences the mortgage market. The central bank itself has been a buyer of mortgage-backed securities since the start of the pandemic. So now that the Fed will be shrinking its balance sheet of bonds, including these securities, there could be an impact on liquidity in the mortgage market. Lenders would need to make up the difference by raising rates.

Already recent housing-market data has shown the massive effect the surge in rates has had on home buyers. “The pandemic boom in home sales is over, and activity is back at pre-pandemic levels,” Mizuho Securities U.S. economist Alex Pelle and chief U.S. economist Steven Ricchiuto wrote in a research note.

It’s clear that the affordability challenges posed by rising rates and higher prices has cooled demand among home buyers. Nevertheless, home listings remain few and far between. That means that home prices likely will continue to grow — albeit at a slower pace — since even with a reduced pool of buyers there aren’t enough properties to grow around, analysts say.

And there’s the potential that rising interest rates could also put a damper on the supply of homes for sale. “Existing homeowners are rate locked-in when their existing mortgage rate is below the prevailing market mortgage rate, because there is a financial disincentive to sell their homes and buy a new home at a higher mortgage rate,” Kushi said.

Most economists anticipate that the housing market is balancing out, meaning that bidding wars and contingencies could soon become a thing of the past.

ShareTweetPin

Related Posts

30-Year Mortgage Rates Spike, Entering 8% Range

by
September 29, 2023
0

‘Kill Black people’: Elon Musk’s Tesla sued for racial abuse at electric vehicle plant

by
September 29, 2023
0

‘Racketeers Built The Unions’: Peter Schiff Slams Biden’s Claim That Unions Built The Middle Class, Warns Of A Financial Crisis ‘Much Worse’ Than 2008

by
September 29, 2023
0

Fannie and Freddie: Single-Family Mortgage Delinquency Rate Declined, Multi-Family Increased in August

by
September 29, 2023
0

Analyst Report: Jabil Inc

by
September 29, 2023
0

Next Post

Dow tumbles 1,000 points, Nasdaq drops more than 4% as Wall Street sell-off intensifies

Lawler: Mortgage/Treasury Spreads, Part I

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

email

Get the daily email about stock.

Please Enter Your Email Address:

By opting in you agree to our Privacy Policy. You also agree to receive emails from us and our affiliates. Remember that you can opt-out any time, we hate spam too!

MOST VIEWED

  • Crocs sees fourth-quarter sales up 42%, CEO Andrew Rees says 2021 was ‘exceptional year’

    0 shares
    Share 0 Tweet 0
  • Biden didn’t accept Putin’s ‘red lines’ on Ukraine – here’s what that means

    0 shares
    Share 0 Tweet 0
  • Ford partners with GlobalFoundries to increase chip supplies

    0 shares
    Share 0 Tweet 0
  • CEOs across the market, economy agree on one big 2022 prediction: More volatility

    0 shares
    Share 0 Tweet 0
  • Inflation is sticking around – and Biden will likely have to wait it out like the rest of us

    0 shares
    Share 0 Tweet 0
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
All rights reserved by www.stockmarket-cafe.com
No Result
View All Result
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy

All rights reserved by www.stockmarket-cafe.com