We didn’t expect the housing market to be quite like this.
Experts in real estate and finance anticipated a busy fall buying season, with more homes available and lower mortgage rates helping buyers jump back in. But instead, rates have been climbing steadily. After briefly dipping, mortgage rate trends show they are now trending over 7%, a level that’s making many potential buyers hesitate. Though we saw a little boost in September when rates were lower, this year’s home sales are on track to be the lowest in decades.
Why the spike in mortgage rates? It comes down to several factors. Treasury yields, which impact mortgage rates, have been rising quickly due to strong economic data and some pre-election uncertainty. And with the upcoming election, there’s even more potential for rates to be unpredictable in the near future.
These recent rate hikes likely surprised Federal Reserve officials too, as mortgage rates don’t directly follow the Fed’s decisions. Instead, they’re based on expectations about future interest rates. Recently, economic data showed strong consumer spending, wage growth, and hiring, which raises concerns that the Fed might need to keep rates high to control inflation. Ironically, a strong economy can actually work against lower mortgage rates.
Adding to the mix, Treasury yields started rising due to the election and concerns about policies that might drive inflation higher. This trend briefly slowed after a weaker jobs report last Friday, but rates quickly shot up again.
As we approach the election, mortgage rate trends are expected to be volatile. Experts anticipate they’ll hover between 5.75% and 6.5% if the economy stays stable, with some predicting an end-of-year rate around 6.3%. However, the path could be bumpy, especially depending on election results and economic data.
The rise in rates isn’t great news for an already tight housing market. We saw a slight increase in listings and contracts in September, but the recent rate jumps are causing buyers to pause. People don’t want to lock in higher payments than they expected, even if they can afford them. However, there’s still a chance conditions might improve. Research shows that around 45% of recent buyers secured mortgage rates below 5% through special financing options like rate buydowns.
So, while a comeback might be slow, mortgage rate trends suggest there are still options for buyers looking to make a move.
Thanks for reading,
Chris
