The Main Key To Understanding Rates
Freddie Mac releases the mortgage rates every Thursday and is the most reliable source for such information. Freddie Mac provides valuable insight for anyone looking to make decisions with their mortgage.
The U.S. Treasury yield reached its highest point since early June. The rate surpassed 3% for the first time in three months. A press release accompanying the survey announced it.
Over the last five decades, look at the relationship between the 10-year treasury yield and the 30-year benchmark yield has been strong.
Treasury yields are used to quote the cost of government bonds. When yields are high, it means interest rates are low and vice versa. This relationship has caused the 10-year Treasury yield to be strongly correlated with the 30-year benchmark yield.
Here's a graph showing that relationship:
The relationship has also been consistent throughout 2021, as evidenced by this graph:
Mortgage rates have been up significantly in the past month, the cause of which is difficult to pinpoint. However, one thing is certain. The rates jump was preceded by a jump in 10-year Treasury rates (shown with red circles)
Here we see that yield rate is something that is impacted by different factors:
Rates Will Affect Home Affordability
A steady rise in mortgage rates could lead to a decrease in home affordability. Home affordability is a term that indicates whether a household can afford to purchase a home. This is determined by how much income is needed to pay for the mortgage, property taxes, and maintenance costs.
As mortgage rates continue to increase, there is a growing concern on the home purchase market. If this happens gradually, it may help level off home prices.
One effect of lower rates and the homes on the market has decreased by 40% in the last two years. This has led to more demand for apartment-style condos and smaller manufactured homes, which can be hard to finance.
The Phoenix area has seen a boom in home sales this year. Despite the number of homes on the market, sellers still see an increase in demand.
Technically the Phoenix and surrounding areas are still very much in a seller's market. Buyers have seasonally adjusted, added in a bit of buyer fatigue, home affordability, and now rates are ticking up.
Hopefully, this seller's market will even out the market for buyers. Families that need to move can sell and re-purchase in most cases. We still do see hot-highly desired neighborhoods getting multiple offers and being a challenge for buyers.
It's nice to see some homes with 15-30 days on the market. It is giving home buyers a break!
Rates are still meager, keeping the higher-priced homes reachable and affordable. If rates go up, we should see a slow down of home price increases. Please get in touch with us anytime if you have any market questions.