Interest rates ticked back up this week to 3.75% for the 30-year fixed-rate mortgage average according to Freddie Mac. The weekly survey cited uncertainty with the trade war with China, as well as other geopolitical concerns, causing volatility with the 10-year Treasury note yield.
It is expected that the global economic slowdown, along with mixed growth data for the United States, will influence the Federal Reserve to ease overnight lending rates during the Federal Open Market Committee meeting next week. If committee members do ease rates by the expected 25 basis points, it will add up to the third rate cut of the year by the Fed. Remember, these rate cuts essentially make it less expensive for banks to borrow money and they do not have a direct effect on home mortgage rates.
While the trade war between the U.S. and China seems to be on a positive track, Brexit somehow got even messier as Prime Minister Boris Johnson was forced to ask for yet another extension from the European Union. It’s been nearly three-and-a-half years since the initial Brexit referendum and now Johnson is pushing for another general election in December of this year.
Volatility in interest rates has started to hit the housing market as mortgage applications took a dive week-over-week, to the tune of 11.9% according to the Mortgage Bankers Association. However, when you look at it year-over-year, volume of applications was still 54% higher than this time in 2018. Refinances even saw a bit of a slowdown because of the slight uptick in rates.
The persistent problem of a housing shortage continues to plague new home sales. The National Association of Realtors’ data shows that existing home sales were abysmal in September, dropping by 2.2%. That’s the first drop in new home sales in two months.
With inventory so low, down 2.7% from a year ago, that’s allowed home prices to rise at a faster pace and out-price many first-time homebuyers trying to get into the market. According to Reuters, the median home price has increased 5.9% year-over-year in September, putting the price around $272,100.