A potential homeowner’s affordability depends in large part on mortgage rates, and in past rising rate periods, home values have decreased as borrowing costs have increased. That hasn’t happened, though, since there aren’t enough homes on the market, keeping many Americans out of the market.
The Mortgage Bankers Association reports that the increase in interest rates has caused mortgage applications to plummet to their lowest point in over thirty years.
Homeowners who had previously locked in lower mortgage rates are now reluctant to relocate or refinance at higher borrowing costs, which helps to maintain low inventory in a market where there is already a chronic dearth of available homes. The expense of financing a purchase as well as the market’s severe freeze have contributed to the lowest level of sentiment among homebuilders in ten months.
Redfin’s Homebuyer Demand Index dropped to its lowest position in almost a year last week, while Moody’s analysts noted in an October research that affordability has declined in every US state over the past few years with no signs of improvement.
Up to that point, the National Association of Realtors’ statistics indicates that a family’s capacity to own a home is currently at a ten-year low.
On Wednesday, bond rates surged to record 16-year highs, with the yield on the 10-year Treasury reaching 4.9%.
According to Mortgage News Daily, the rate on a typical 30-year fixed mortgage exceeded 8% on Wednesday for the first time since 2000.
The increase coincides with a new high in bond rates, as investors process the most recent economic data and keep an eye on the outcomes of the most recent auction of 20-year Treasury bonds, which saw the 10-year Treasury break 4.9%.