The housing market is an interesting one because of its movement. While the stock market falls, the housing market often moves up. Indeed, real estate has a low correlation with stocks and bonds and has an historically high risk-adjusted rate of return relative to stocks and bonds. The most recent update with the Real Estate market revolves around mortgage rates, which are simply the rates of interest charged on a mortgage. Over the past three weeks, these rates have been falling, however, this week they rose sharply. According to Mortgage News Daily, the 30-year fixed hit 5.36% Monday and then moved higher again Tuesday to 5.47%. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury.
The unexpected jump was likely due to data released from the U.S. Manufacturing Index which seems to suggest the economy isn’t slowing as fast as most thought. Even so, the economy is slowing and all the factors pointing towards this trend are present. Moreover, because the real estate market tends to lag behind what is actually happening by about 6 months, it makes some sense that prices are still rising while realtors are reporting lower sales, and mortgage demand to purchase a home is dropping.
What do you think about the spike in mortgage rates, and will it reverse soon?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.