With the benchmark 30-year mortgage rate having hit a 20-year high but still running below its long-term average, mortgage loan application volume in the U.S. dropped another 4 percent over the past week to its lowest level since 1997 and purchase mortgage activity is down 38 percent versus the same time last year, according to data from the Mortgage Bankers Association.
At the same time, the probability of the Federal Reserve raising the federal funds (“interest”) rate by at least another full percentage point by the end of the year is still holding at “100 percent” and the share of applications for adjustable rate mortgages (ARMs) is nearing 13 percent, which is the highest share since March of 2008.
Closer to home, purchase activity was down nearly 50 percent on a year-over-year basis in San Francisco last week, having been down over 40 percent on a year-over-year basis since mid-September, none of which should catch any plugged-in readers by surprise.
Well with 30yr fixed rates hitting a new 20yr high of 7.22% today, the drop in new mortgage applications shouldn’t be a surprise to anyone. If the Fed wanted to chill the housing market they seems to have succeeded. I’m hoping the Fed takes it’s eyes off the rearview mirror soon before they drive the U.S. economy off a cliff.
While the average 30-year rate has inched up to 6.94 percent, it hasn’t yet crossed the 7 percent threshold and remains below its long-term average of 7.76 percent.
Rates are expected (speculated) to rise at least another 75 basis points – we might be well on our way to witness getting very close to 7.76% or maybe even jump past..
November hike is expected to come in at 75 basis points. December at 50-75 bp.
Driving the economy off a cliff may be exactly what is needed to retard inflation.
The degree to which Paul Volcker is revered in modern central banking, for killing inflation in the 80’s is very high.
Whoever is president won’t like it, congress won’t like it, and consumers and those out of work won’t like it, but raising rates until we have a recession will stem inflation. It’s the “bad cop” part of being a central banker.
That… Or raise wages and enact a windfall profits tax on all of these businesses and landlords using inflation as a guise for price gouging.
Can’t raise wages – won’t raise wages. With rising interest rates, cutting taxes on the consumer class would actually be beneficial as it would have the effect of increased wages – but that won’t happen either. We could be witness to an unprecedented liquidity freeze.
A federal minimum wage increase would definitely raise wages, both directly and indirectly, across the board. But needs to go hand in hand with windfall profits tax so that companies can’t use “mUch HiGhEr WaGeS” as an excuse to raise inflation more.