No a little over a month ago you could not get a 3% mortgage. You could get perhaps a 3.625% rate. That same mortgage today with the same points is close to 4.5%. Rates move up instantaneously on days when the benchmark moves but take a few days to retrace when the benchmark goes the other way. Yes this does affect buyers.
I am not sure what panic button the FED can do. The FED buys bonds at auction. They buy MBS, they buy what they can buy. They cannot directly manipulate the yields on treasuries on a given day. Aye caramba. I do believe manipulation of financial markets is a given (see PPT) but that will not really affect local housing markets. To say that this is happening when the market is hot makes no sense. Any market is hot and then it cools down.
Many statements here mimic those posts back in 2006 that were ripe with titanic like prognostications. They were wrong then and they are wrong now.
I will maintain what I have always said which was that this hot market will normalize. Furthermore the only thing that will cause a serious problem in the housing market will be interest rate shock. Now this could be a precursor to that shock but I doubt it. The real question is, when will rates start to cause a tangible effect. Hard to say but my gut tells me if we hit a 6% rate then that will
cause pain. Take a 600k home with 20% down. At 3.5% your p/i is around 2155, at 4.5 it is 2430, at 5.5 it is 2725 and at 6.5 it is 3030. So in about 6 weeks we have added around 280 smackers per month to a payment. That hurts some and has an effect. At 5.5% we are adding almost 600 clams a month, close a 20% higher payment. To me that will indeed claim some buyers. However the market will also respond and sellers will need to adjust pricing. We will see what happens.
