Mortgage Rates Holding at Elevated Levels – Could Inflation Shift Them?
Bond yields have been hovering around 4.50% recently, but tensions with Russia seem to be keeping them from rising further. Since mortgage rates often move in the same direction as bond yields, this stability has helped keep recent rate increases in check.
The U.S. economy looks strong overall, with stock prices, real estate, and even alternative investments like Bitcoin and gold reaching or staying near record highs.
The key question now is whether financial conditions (like interest rates and borrowing costs) are tight enough to slow things down. And if they’re not, how quickly should the Federal Reserve lower rates to avoid economic overheating?
What Does This Mean for Housing?
Here’s how these trends connect to homebuyers and homeowners:
- Existing Home Sales: Recent data showed that home sales bounced back slightly in October, with annualized sales reaching 3.96 million homes, a 3.4% monthly increase. This improvement was driven by lower mortgage rates earlier in the year, but with rates rising again recently, we could see slower activity ahead.
(Source: National Association of Realtors, October Existing Home Sales Report) - Mortgage Rates: Rates are still elevated, with the 30-year fixed rate averaging 6.84% this week and the 15-year fixed rate at 6.02%. While this is down 45-65 basis points compared to last year, rates remain higher than earlier this fall, making monthly payments more expensive.
(Source: Freddie Mac, Primary Mortgage Market Survey, November 21, 2024) - Home Prices: Home prices climbed 4% year-over-year to a median of $407,200 in October, extending a streak of annual price increases.
(Source: National Association of Realtors, October Existing Home Sales Report)
What to Watch Next Week
Right before the Thanksgiving holiday, Wednesday’s Personal Consumption Expenditure (PCE) release will show whether inflation is cooling, and this could influence whether the Fed sticks with current rates or starts lowering them. Bond yields could shift based on the PCE report, which could in turn impact mortgage rates.
