Real estate: 'Price and prices are rising in the US, buyers are trapped'

Real estate: ‘Price and prices are rising in the US, buyers are trapped’

In today’s Macro Chartmania column, we take a look at the 30-year US mortgage rate. In January it was 3.1%. It is now above 4%. This is only the beginning. Many American families can no longer afford to buy real estate with a borrowing rate of 4%. This exacerbates the major problem of obtaining housing in the United States. Real estate prices continue to rise (+15% year-over-year, with an average price of $357,000), while sales are declining and unsold home inventories are increasing.

Buyers are trapped. The constant rise in prices and the rise in mortgage rates presents a double difficulty. Many buyers who got a 3% borrowing rate can no longer finance the purchase of their property at 4%. Exactly one year ago, the average 30-year mortgage rate was around 3%. It is now 4.5%. This is the highest mortgage rate since December 2018. The average 15-year fixed mortgage rate, which is especially popular with families refinancing their homes, has also risen. It’s hovering around 3.4%, compared to 3.09% just a week ago.

This is only the beginning. Mortgage rates are closely related to the Federal Reserve’s short-term interest rate. We believe the Fed will raise the rate by 400 basis points (4 percentage points, editor’s note) during this cycle in order to combat inflation. If so, it would be a tightening cycle similar to that which has occurred since 1985.

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The 30-year mortgage rate could thus exceed 5%. This will be the first time since 2010. The social consequences will be significant (buyers will abandon the market, break the social contract, etc.). For a growing number of Americans, owning real estate is now a distant dream.

Saxo Bank (with MacroBond)

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