Mortgage rates fall for 2nd week, 30-year fixed at 6.35%

Mortgage rates fall for 2nd week, 30-year fixed at 6.35%



Mortgage rates ticking down just slightly this week, the 30-year fix falling to 6.35% from 6.39% the week before. This is the second straight week of declines. Rates climbed to 5% in April of 2022 and have stayed above that line since then, apart from just one week. Although there are some signs inflation is cooling slightly, the Fed's tightening cycle has kept mortgage rates high. And there's a new complication that could actually raise rates.

The stalemate in Congress over the debt ceiling. Zillow reveals mortgage rates could soar above 8% if the US defaults on its debts, sending the average mortgage payment up 22%. For more on this, we turn to John Lovallo, UBS US Homebuilders and Building Products Equity Research Analyst. Good to have you on the show here. So I'm wondering, are your predictions about what would happen with a debt ceiling default here? Would they be as dire as what Zillow is projecting? Hey, Rachelle, how are you? Thanks for having me. You know, frankly, look, if there's a default on debt here in the US, we've got some big problems that extend well beyond what's happening in the homebuilding industry. I can tell you that, you know, I read the article that Zillow put out there.

It's interesting. I think the math is sound. If you go from 6.5%, you know, mortgage rate to 8.5% on a $450,000 average new home in the US. So if your payment is going to go up by about $7,200 per year, that's about 22%. Would that, you know, I think a lot depends on how long this sort of crisis lasts and you know, how long consumer confidence is really strained.

So we'll have to wait and see. I don't have a prediction on, you know, what it would do for mortgage rates, but we are in a situation where affordability is challenged. And so anything that negatively impacts interest rates would be negative. And you figure this is coming at a time where, you know, the Fed's still debating whether or not to hold interest rates at the moment. What are we likely then to see happen between now and then as we get closer to that, that X state? You know, I think that there could be incremental pressure up on interest rates. I think if you look at affordability from a housing standpoint, it's important to think of in two components. One, there's the interest rate component, which we're clearly speaking of.

There's also home prices. And I think that, you know, those are the two levers that need to adjust in order to find the clearing price in a market for a home. Home prices have remained very resilient, which I think is a testament of the demand that's out there currently. Also, the fact that there is very little existing home supply, only 2.6 months in fact, of existing home supply on the market. So, you know, there's various things that could happen. I think at the end of the day, we're looking at a market that is underbuilt and there is a tremendous amount of spent up demand that's still out there.

And so we still remain, you know, fairly optimistic on the overall market. And as you mentioned there, I mean, you have fewer listings of also helping, you know, push prices up, steady buyer demand as well. In terms of affordability, when do you expect that to pick back up? Because it's still a very tough time, especially if you're a first time home buyer. It is a very tough time. I think that what's interesting, you know, in given going back to the fact that there's very little existing home inventory on the market, to the extent that folks are looking to buy a home, they are more inclined today than at probably any point in history to look at a new home. And what the builders, the home builders have been able to do, many of which own their own captive finance companies, is to help buyers find that clearing price, whether it's through incentives on lowering the actual price of the home, or actually what's been happening more often is buying down interest rates. They have the ability to do this because of the captive finance arms that they have.

And so buyers out there today that are buying new homes are not paying six and a half percent that, you know, the headline rate, they're paying under five percent in most cases. And so I think that that sort of lever is very important to keep buying, you know, the buying wheel continuing to turn. And we think that, you know, that positions the public home builders in particular extremely, extremely well here in this environment. And we know you track what people are searching for in terms of, you know, home buying. So what sort of price points are we looking at? And we know that the Sunbelt regions were doing well, but we're starting to see some new ones are showing up there as well. Yeah. So, you know, the Google home search note that we put out showed that, you know, essentially normal seasonality as we moved into, you know, April on both the new home side and the existing home side, which is encouraging and sort of what's to be expected.

The average new home in the U.S. right now is about $450,000. I think to your point, Rochelle, as you move into sort of the hotter areas of the market, the Sunbelt states, if you will, you know, depending on the market, because this is a very localized business home building, prices could be significantly lower. And I think that's where we're seeing the hottest demand is if you look at price points that are, you know, sort of were a three handle on them. If you think about Texas and Florida, different markets across, you know, those states in particular where things are particularly hot, that's really where the hottest demand has been. Now, the consumer in general or the home buyer in general has been pretty resilient.

And so there's been demand across the spectrum, but we still think that sort of the hottest part of the market is that first time entry level buyer, where both the buyer, which is very need based and driven by life events and the home builder are able to sort of, again, meet that clearing price by maybe building a smaller footprint, maybe moving a little further out of the city than perhaps would have initially been desired. But there are ways to still make that math pencil. All right, still some hope there for first time home buyers. A big thank you there to John Lavalle for joining us this morning. Thank you so much.



Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Yahoo FInance Premium, Stock market, mortgages, real estate

Post a Comment

Previous Post Next Post