Mortgage News Daily reports Mortgage Rates Surge to Highest Levels in More Than 3 Years.
The chart does not quite show what MND headline says but the difference is a just a few basis points. I suspect rates inched lower just after the article came out.
For the past few weeks, rates made several successive runs up to the highest levels in more than 9 months. It was really only the spring of 2017 that stood in the way of rates being the highest since early 2014. After Friday marked another “highest in 9 months” day, it would only have taken a moderate movement to break into the “3+ year” territory. The move ended up being even bigger.
From a week and a half ago, most borrowers are now looking at another eighth of a percentage point higher in rate. In total, rates are up the better part of half a point since December 15th. This marks the only time rates have risen this much without having been at long term lows in the past year. For example, late 2010, mid-2013, mid-2015, and late 2016 all saw sharper increases in rates overall, but each of those moves happened only 1-3 months after a long term rate low.
Not a Drill
So far this month, MBS have stunningly dropped over 200 bps, which easily translates into a .5% or more increase in rates. I’ve been shouting “lock early” for quite a while, and this is precisely why, This isn’t a drill, or a momentary rate upturn. It’s likely the end of a decade+ long bull bond market. LOCK EARLY. -Ted Rood, Senior Originator
Housing Bust Coming
Drill or not, if rising rates stick, they are bound to have a negative impact on home buying.
In the short term, however, rate increases may fuel the opposite reaction people expect.
Why?
Those on the fence may decide it’s now or never and rush out to purchase something, anything. If that mentality sets in, there could be one final homebuilding push before the dam breaks. That’s not my call. Rather, that could easily be the outcome.
Completed Homes for Sale
Speculation by home builders sitting on finished homes in 2007 is quite amazing.
What about now?
Supply of Homes in Months at Current Sales Rate
Note that spikes in home inventory coincide with recessions.
A 5.9 month supply of homes did not seem to be a problem in March of 2006. In retrospect, it was the start of an enormous problem.
In absolute terms, builders are nowhere close to the problem situation of 2007. Indeed, it appears that builders learned a lesson.
Nonetheless, pain is on the horizon if rates keep rising.
Price Cutting Coming Up?
If builders cut prices to get rid of inventory, everyone who bought in the past few years is likely to quickly go underwater.
Mike “Mish” Shedlock
About 3.5 years ago when rates were about what they were now, I bought a condo for 100k, now my units are selling for 135k. I would really appreciate some kind of rate increase to keep rates up, I’m tired of the over valuations on my property taxes, it’s as if the condo owners association has caught on as well, raising condo dues every .. single .. year. Sadly.. My wages can’t keep up, the only upside is I got smart and moved close to work. I can bike/walk to work, and even a grocery store is a mile away now, but the risk of getting run over by driver texters is not decreasing.
“If builders cut prices to get rid of inventory, everyone who bought in the past few years is likely to quickly go underwater.” Perhaps the biggest IF of all time. Won’t happen in SoCal no matter what.
I believe you represent a very large, hard to measure suppressed appetite for housing. If prices increase disinflate or even stay flat the demand will still be there as many people have been unwilling trapped on the side line. Any meaningful price drop (a huge if) will be met with a demand that can’t be quenched and protect any type of real bubble burst. Just a theory, not touting it as fact.
It does not have to be the same bubble bursting twice, there is another bubble forming in real estate that will burst. Easy cheap money is chasing properties everywhere. How long do you believe that will keep going? It cannot last as the money will run out.
The same bubble isn’t going to burst twice, and the inference (prediction?) that another housing “bust” is around the corner is pure fantasy. See the chart in link below showing the catalyst for the last bust. We don’t have the same problem today.
https://1.bp.blogspot.com/_pMscxxELHEg/RxzD0s_7EYI/AAAAAAAABB4/ljDSXZhMG3o/s400/IMFresets.jpg
A falling dollar may help the housing market as our homes become less expensive to foreigners.
It looks like the current rates are roughly the same as a year ago.
The charts tell us everything, it’s another race to a recession sooner or later.
the 10 year rate at 2.7% is a killer for both the housing and auto market.
I think Canada and Australia’s housing markets will tank first. Then UK and US. The level of private debt is higher.
Home prices remind me of diamond prices – there isn’t a limited supply, just a form of manipulation. Who of the next generation will be able to afford these houses? As energy gets more expensive these huge homes with small lots are far from capable of surviving in a time of limited resources. Malinvestment to the extreme.
I hope prices drop soon as I am in the market for one. I relinquished my claim to half of the home I owned with my ex-wife following our recent divorce. (We are still good friends). I am not sure where I want to live – here in Phoenix, Atlanta, Florida, somewhere else – but this crummy apartment is just too small. Being retired, I prefer not to have a mortgage nor other monthly payments so a price drop would be great.
We saw the 10 year treasury go to 3% in 2014 and it came tumbling back down again. Today its what 2.669? (mortgage rated track 10 year treasury). I think there is still a good chance with a decent stock market drop and some bad economic news could send the 10 year T tumbling down again.
Not to beat a dead horse, but I believe the new tax law will have an effect as well especially in places like CA.
Not to beat a dead horse, I feel the new tax law will have an impact as well especially in states like CA.
Homebuilders are down about 5% in the last couple of days.