After rising steadily for more than a month, mortgage rates fell last week following a deposit run that sparked a liquidity crisis for US regional financial institutions. Silicon Valley Bank and signature bank. But what can we expect beyond the housing market?
Industry observers said lower mortgage rates would support home prices, at least in the short term, but the outlook for the spring season was better.
freddie mac A major mortgage market survey showed 30-year fixed-rate mortgages were at 6.60% as of March 16, down 13 basis points from the previous week. According to the survey, the same rate he had a year ago was 4.16%.
“Mortgage rates are falling after five straight weeks of gains of more than half a percentage point,” Freddie Mac chief economist Sam Cater said in a statement. and should benefit borrowers in the short term.”
Other indicators point to even lower mortgage rates.and mortgage news daily, the 30-year mortgage rate for conventional loans was 6.54% on Thursday afternoon. The interest rate for jumbo loans ($726,200 and above) was 6.15%.
Borrowers are also taking advantage of low interest rates to apply for mortgages.of Mortgage Bankers Association (MBA) reported that its composite mortgage index, a measure of loan application volume, increased by 6.5% in the week ending March 10 compared to the previous week.
“Mortgage applications have been driven in part by concerns about the health of some institutions in the banking sector,” MBA president and CEO Bob Broeksmit said in a statement. increased for two weeks in a row.
“Once the spring homebuying season begins, further interest rate declines expected will likely spur an increase in additional applications.”
Nick Shah CEO Home.LLC., Mortgage rates are catching up with Treasury yields in the short term. Investors flocked to safer assets amid fears of bank failures, with 10-year Treasuries falling from nearly 4% early last week to 3.4% mid-week. Amid falling mortgage rates, “improved housing affordability is supporting home prices,” Shah said.
A growing group of monetary policy observers believe the Fed may stop the Fed from raising rates at its meeting scheduled for March 21-22.
“February employment and inflation data both show the economy is cooling slowly but still hot. likely to mean a further rate hike,” said Hannah Jones, economic research analyst Realtor.com, said in a statement. “But given last week’s bank failures, the Commission may choose to remain conservative to ensure economic stability.”
Analyst goldman sachs It is estimated that stress on smaller banks will lead to tightening of lending standards, which could reduce US economic growth by 25-50 basis points in 2023. housing wire So far, mortgage lenders have not tightened their lending terms. )
“Our rule of thumb is that this gradual tightening of lending standards, through its impact on market-based financial conditions, will outstrip the economic growth impact of a rate hike of about 25 to 50 basis points,” Goldman Sachs analysts said. suggesting that it would have the same effect.”
in the long run
Shah expects the Federal Reserve to raise interest rates slowly over the medium term. As a result, house prices will continue to fall further.
“The Fed will continue to raise rates, albeit slowly, as inflation rose 0.4% month-on-month in February,” Shah said. “Housing accounts for 45% of inflation, and this percentage has been increasing for months, so the Fed is keen to destroy demand to cool the housing market.”
On the other hand, a prolonged pause in rate hikes would lead to a rapid increase in demand, but housing supply is still near an all-time low. After that, “house prices will skyrocket,” Shah said.