US Mortgage Interest Rates Exceed 7 Percent
Home sales are on the decline as inflationary pressures rise in the economy.
Due to various economic factors, mortgage rates have now exceeded 7 percent.
Since September 2024, the rate has been consistently trending upward, although there was a slight decrease in December. “The robust nature of the economy is driving this rise in rates,” noted the corporation.
Rising costs have subsequently dampened consumer confidence in the U.S.
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Escalating prices, along with rising interest rates and severe weather conditions, are causing potential homebuyers to reconsider, resulting in negative trends throughout the U.S. housing market.
Unsold Homes, Treasury Yields
Wildfires in California and harsh winter conditions in the Northeast, Midwest, and Southern U.S. are contributing to this situation.
According to Redfin’s Homebuyer Demand Index, January saw an 11 percent drop month-over-month in homebuyer interest.
“Moreover, prospective sellers are hesitant to enter the market, leading to the largest annual decline in new listings since September 2023.”
A pending home sale is recorded when a buyer has accepted an offer, but the contract is not yet signed.
High housing prices, which have risen by 5.8 percent annually, are discouraging potential buyers, with median housing payments reaching their highest point in over two years, the brokerage stated.
In California, the wildfires have disrupted the local housing market, resulting in decreased demand for home purchases in the Los Angeles metro while rental demand has surged as residents are displaced.
“There’s a prevailing sense of sadness and stress regarding the destruction affecting so many neighborhoods,” commented Susan Brown, a Redfin agent in the Los Angeles area. “Many people are now in search of new homes, and we are witnessing a chaotic ripple effect in the market. I’ve personally had three clients who lost their homes reach out to me for assistance, and we are experiencing an influx of clients looking for rental properties.”
Mortgage rates are influenced by treasury bonds, especially the yields on 10-year bonds. As uncertainty in the market increases, investors buy bonds, which generally leads to a decrease in yields. This trend is often mirrored in the mortgage market as rates decrease.
The yields on the 10-year treasury notes have risen over 10 percent in the past three months. However, there was a nearly 3.4 percent decline over the last five days, indicating a moderation in yields.
