The mortgage rate pendulum swings yet again
Expect
2024
to
be
mildly
better
than
2023
with
mortgage
rates
falling
in
the
second
half
of
the
year,
housing
experts
opined
in
their
forecasts
at
the
end
of
the
year.
Cuts
to
the
Federal
funds
rate
(and
subsequently
to
mortgage
rates)
are
imminent,
traders
enthused
after
December’s
meeting
of
the
Federal
Open
Market
Committee
in
which
committee
members
predicted
three
rate
cuts
in
2024.
Some
experts
forecasted
as
many
as
six
rate
cuts
in
the
year
based
on
this
news.
Rate
cuts
are
still
coming,
just
not
in
March,
traders
and
market
experts
reasoned
more
recently
as
the
economy
continued
to
run
hot.
And
now
on
the
heels
of
reports
of
stronger
than
expected
jobs
growth
and
stickier
than
anticipated
inflation,
the
market’s
shift
from
optimism
to
pessimism
over
rate
cuts
is
complete.
Some
even
expect
rate
hikes
before
rate
cuts.
The
pessimism
is
visible
in
mortgage
rates.
Freddie
Mac‘s
weekly
Primary
Mortgage
Market
Survey
is
climbing
back
towards
7%.
HousingWire’s
Mortgage
Rate
Center,
which
relies
on
data
from
Polly,
is
already
above
7.2%.
Rates
were
as
low
as
6.91%
for
Polly
and
6.64%
for
Freddie
as
recently
as
February.
On
Tuesday,
they
reached
7.50%
on
Mortgage
News
Daily,
a
high
for
this
year.
Mortgage
rates
hold
major
power
in
the
housing
industry;
most
importantly,
high
rates
exacerbate
the
current
affordability
crisis
by
walloping
the
buying
power
of
would-be
buyers
and
discouraging
some
would-be
sellers
–
those
with
low,
fixed-rate
mortgages
–
from
listing
their
homes,
a
drain
on
available
inventories.
Rising
rates
are
already
having
visible
effects.
For
example,
the
Mortgage
Bankers
Association‘s
purchase
index,
which
represents
all
mortgage
applications
for
the
purchase
of
single-family
homes,
has
fallen
for
four
straight
weeks.
The
market
yield
on
a
10-year
Treasury
security,
a
product
that
often
correlates
with
the
movements
of
mortgage
rates,
hit
4.56%
last
week,
its
highest
level
since
November
of
last
year,
before
the
market’s
rate-cut
bullishness
began.
That
is
a
sign
that
traders
expect
high
interest
rates
for
longer
–
possibly
even
rate
hikes
before
we
see
rate
cuts.
All
this
leaves
housing
professionals
once
again
fighting
for
their
share
of
shrinking
pies
–
as
we
have
observed
with
recently
released
mortgage
data
and
RealTrends
Verified’s
brokerage
data,
as
well
as
deeper
dives
on
the
brokerage
landscapes
in
Jacksonville
and
San
Diego.
It
is
unsurprising,
then,
that
real
estate
stocks
have
suffered
since
the
FOMC’s
March
meeting
and
the
recent
job
and
inflation
reports.
That
includes
the
nation’s
top
homebuilders
(DR
Horton
and
Lennar),
mortgage
originators
(United
Wholesale
Mortgage
and
Rocket
Mortgage),
brokerages
(Anywhere
and
Compass)
and
residential
search
portals
(Zillow
and
CoStar,
which
owns
Homes.com).
There
are
other
dynamics
at
play
for
some
of
these
companies,
however.
The
brokerages
are
also
contending
with
the
rule
changes
included
in
a
proposed
settlement
by
the
National
Association
of
Realtors;
some
investors
also
believe
those
rule
changes
advantage
CoStar
at
the
expense
of
Zillow.
UWM,
meanwhile,
is
contending
with
a
scathing
investigative
report
by
a
hedge-fund-affiliated
news
organization
whose
hedge
fund
shorted
UWM
and
went
long
on
Rocket;
it
is
also
dealing
with
pending
litigation.
UWM
denies
the
allegations
made
in
the
report.
High
mortgage
rates,
fewer
mortgage
applications
and
fewer
home
sales
are
unfortunately
not
the
only
effects
housing
professionals
could
see
from
a
more
prolonged
high-rate
environment.
There
are
also
spillover
effects
from
other
industries,
especially
office
real
estate.
Regional
banks
–
which
traditionally
have
been
major
residential
mortgage
originators
–
went
big
on
commercial
real
estate
loans
as
larger
banks
scaled
back
in
this
area
in
recent
years.
That
increased
their
exposure
to
downtown
office
towers,
which
have
seen
an
exodus
of
tenants
and
a
bottoming
out
of
appraised
values
just
as
a
record
$2.2
trillion
in
commercial
real
estate
debt
comes
due
over
the
next
few
years.
That
ties
up
capital
that
could
otherwise
flow
to
residential
mortgages
and
in
some
cases
stresses
banks
like
New
York
Community
Bank,
parent
of
Flagstar
Bank
—
the
7th-largest
bank
originator
of
residential
mortgages,
5th-largest
sub-servicer
of
mortgage
loans
and
the
2nd-largest
mortgage
warehouse
lender
in
the
country.
Homebuilders,
too,
feel
the
effects
of
prolonged
high
rates.
Although
homebuilder
confidence
is
still
up
significantly
since
last
fall,
new
housing
starts
are
slowing.
The
dim
prospects
for
homebuyers
have
turned
some
investors
to
the
nascent
build-to-rent
sector,
essentially
a
bet
that
high
rates
are
here
to
stay
for
long
enough
that
would-be
buyers
are
now
would-be
renters.
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