The Impact of Rising Rates?
The business headlines this morning are trumpeting the fact that 10-year Treasury rates hit a five-year high yesterday and where the 10-Year goes, mortgage rates tend to follow. So it’s no surprise that the average rate on a 30-year fixed mortgage ticked up and 1/8 of a point on Monday and another 1/8 of a…
The business headlines this morning are trumpeting the fact that 10-year Treasury rates hit a five-year high yesterday and where the 10-Year goes, mortgage rates tend to follow. So it’s no surprise that the average rate on a 30-year fixed mortgage ticked up and 1/8 of a point on Monday and another 1/8 of a point yesterday to land at 7.125 percent, the highest it’s been since July 2006. (These moves come after a 6.6% rise in mortgage applications last week.) The big question on everyone’s mind is at what point do the higher rates start to negatively impact the New York City real estate market. This could just be another chance for brokers to start making the crazy argument that people should rush to buy now before rates go up. That one’s always blown our mind.
10-Year Treasury Yields Hit 5-Year High [NY Times]
US Mortgage Rates at Peak Since July 2006 [Reuters]
Mortgage Applications Index Rose 6.6% Last Week [Bloomberg]
Anon at 9:34 wrote:
“I agree with the first poster – even though 7.5% is not TERRIBLE historically, it’s pretty awful when you consider that affordability is already at an all time low.”
???Affordability is already at an all time LOW???
Is that why there’s a building boom underway in NYC?
The forces driving demand for the Brooklyn brownstone market are much bigger than a few basis points on a mortgage. Rates are a factor, no doubt, they facilitate this market. But really, mega-trends such as reverse migration by younger families, relative crime rates, comparable housing opportunities that require 3hr daily commutes, consumer preferences for urban living, these factors truly drive demand and force prices up. Rates are back where they were one year ago, access to credit is no impediment. Just because foreign institutional investors moved cash out of equity into government debt doesn’t mean the bottom will drop of Brooklyn brownstone real estate.
11:16, I’m sure that many buyers are very well-informed about mortgage rates and mortgages in general. But I know that many others aren’t – take a look on this site’s forum and you’ll find many people asking very basic questions about loans. Which is a good thing, by the way. But many people have only a vague idea of how this works when they begin the process.
I locked on my rate on Monday at 6.875%..
I wish I locked in 1 week earlier I would of gotten 6.7% .
Not a big difference but every little bit counts when homes costing this much…
because the last leap was literally in the last 5 days, people tend to have conversations with their mortgage broker once every few weeks?
Either way, you can’t deny the psychology. The ansonia court condo-of-the-day featured here a week ago just went up by over $600 a month due to the last pop in rates.
And what do you know, today, corcoran has slashed the price on it by $50k, it is now at 899k list.
10:36, why do you assume that buyers are so ill-informed about interest rates? i certainly knew what the prevailing rates were when i was shopping for a home, and i imagine most others do as well. the nyc market is not driven by the type of people who make bids without knowing what their monthly cost will be.
I expect this to screw with open houses and bids, starting now. People are looking at places with the mindset that mortgage rates are 6-something. It doesn’t help that all those stupid mortgage calculators and broker hand-outs under-state the cost of the mortgage.
So someone sees a place that is a stretch, bids at their top range, gets excited, goes home and pulls out the calculator, calls their mortgage broker and has a talk, then thinks.. wow.. thats a monthly nut I didn’t expect. The difference between assuming 6.5 and getting 7.2 is 10% higher monthly payments! Thats a huge jump in a short time.
bid gets pulled, house goes back on the market. Other buyers notice this, and start to wonder that perhaps this isn’t the sellers market that the brokers keep saying it is.
8% will still be low. I think once you tick above that you’ll see a reaction
Yep 9:59 Jeremy forgot about the other side of the equation.