Rates at Multi-Year Highs

Rates at Multi-Year Highs

Mortgage interest rates continue to climb and have now set new multi-year highs. The higher rates are making it more difficult for homebuyers as they rush in to try to avoid the risk of buying when rates are rising. Just as we saw back in 2005, increasing rates initially bring many buyers to the market before the higher rates really become a serious drag on home values. As rates move up, buyers are generally forced into lower home prices or to accept a payment that exceeds their comfort level. Neither of these are positive experiences for the housing market and could lead to trouble down the road. If the slowing trend of new construction continues, that could be a sign of overall weakness developing within the housing market. Remember, the initial signs of a housing crisis were evident in 2005. However, they weren’t acknowledged until a couple years later. There are many similarities between now and 2005. Although it’s hard to say where things will go, it’s responsible to acknowledge the trends and potential impact a couple years down the road.

 

Despite ongoing threats between the US and China, the stock markets are looking to set new all-time highs. With stocks nearing this critical level, it shows the lack of concern investors truly have over the potential impact of tariffs. President Trump continues to step up his threats against China. However, China appears to be committed to the battle and is not showing signs of backing down. Trumps fear is that China will add tariffs to produce to turn the farming industry against the Republican Party. Although that seems like a long-shot, it will be interesting to see if China makes the move. That will most certainly upset President Trump, which will likely lead to further escalations. With most of the goods being imported from China now being taxed with tariffs, there isn’t much more to add to the basket. The weapon will then likely be to increase the tariffs, which will continue to drive consumer inflation higher here in the US. As you know, that is the worst possible scenario for mortgage interest rates which will drive higher as inflation increases.

 

Hopefully, any rate needing to be locked has already been secured. We will maintain our locking position.