Fed officials, including Jerome Powell at last week’s post-FOMC press conference, have repeatedly cited elevated mortgage rates as the quintessential example of how the run-up in long-end Treasury yields since late-July tightened financial conditions.
Financing costs for Americans struggling to realize the homeownership dream neared 8% last month. While not anomalous from a historical perspective, rates were still the highest in nearly a quarter century. When considered with record-high home prices, buyers were (and still are) being squeezed on both sides of the affordability equation.
10-year yields plunged 27bps last week. Because so much of the tightening impulse (e.g., lower stock prices, a stronger dollar and so on) came “courtesy” of the sharp increase in yields, the outsized bond rally served to negate a meaningful portion of that tightening. Just ask mortgage rates.
The MBA’s index showed a 25bps drop in data released Wednesday. It was the second straight decline and the largest in 15 months.
Rates are now 7.61%, the lowest since early last month. Applications rose for the first time since October 6.
MBA VP Joel Kan cited Treasury’s refunding announcement in explaining the bond rally behind the decline. “Last week’s decrease in rates was driven by the Treasury’s issuance update, the Fed striking a dovish tone in the November FOMC statement and data indicating a slower job market,” he said.
Obviously, the drop is meaningless from the perspective of America’s frozen housing market, where the majority of homeowners enjoy four- or, at worst, five-handle mortgages.
According to Redfin, almost 7% of for-sale homes had a price drop in the four weeks to October 29. That, Dana Anderson noted, is “the highest portion on record.”
“High rates have forced some sellers to lower their asking price to make up for high interest rates on monthly payments,” Anderson remarked. “It’s worth noting that buyers are getting a bit of relief, at least temporarily [as] economic events sent daily average mortgage rates from 8% down to 7.5%.”
Separately, Redfin said Wednesday that the share of homes bought in all cash was the highest in nearly a decade in September.
