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30-Year Mortgage Rates increase to 5.85%.


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2022 Jun 10, 1:10pm   6,697 views  59 comments

by Al_Sharpton_for_President   ➕follow (5)   💰tip   ignore  

Goldman: "The median monthly payment of a 30-year mortgage is up 56% year-over-year".

In April, I wrote: How High will Mortgage Rates Rise? In that post, I included a simple method for estimating 30-year mortgage rates based on the 10-year Treasury yield.

Housing economist Tom Lawler explained that the relationship is more complicated in Lawler: Mortgage/Treasury Spreads, Part I and Lawler: Mortgage/Treasury Spreads Part II: “Decomposing” the Widening This Year.

Here are some updates to the questions I posed:

What are current rates?
How high will mortgage rates rise?
How do higher mortgage rates impact affordability?
What are current rates?

Mortgagenewsdaily.com reports that as of today, average 30-year fixed mortgage rates are at 5.85% for top tier scenarios. Rates increased today as a result of the inflation report released this morning. Here is a graph from Mortgagenewsdaily.com that shows the 30-year mortgage rate over the last 5 years.

It is the sharp increase in monthly payments - due to sharply higher mortgage rates - that is impacting the housing market.

The Mortgage Bankers Association’s (MBA) reported this week that as of June 3rd:

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40 percent from 5.33 percent, with points increasing to 0.60 from 0.51 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

And Freddie Mac reported this week:

Freddie Mac … released the results of its Primary Mortgage Market Survey® (PMMS®), showing that the 30-year fixed-rate mortgage (FRM) averaged 5.23 percent.

“After little movement the last few weeks, mortgage rates rose again on the back of increased economic activity and incoming inflation data,” said Sam Khater, Freddie Mac’s Chief Economist. “The housing market is incredibly rate-sensitive, so as mortgage rates increase suddenly, demand again is pulling back. The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home.”

All of these measures move together over time (and the Freddie Mac PMMS is used for historical data), however when rates are moving quickly - like today -mortgagenewdaily.com is the most up-to-date.

How high will mortgage rates rise?

Goldman Sachs economists wrote yesterday:

In our view, the broad-based strength in core inflation tips the balance for the Fed to continue its 50bp-per-meeting pace of tightening through September. We continue to expect a terminal rate of 3.0-3.25%, which will now be reached in 1Q2023 under our forecast.

Based on the simple relationship between the 10-year Treasury yield and the 30-year mortgage rate, the 30-year mortgage rate will peak around the current level, although there is some variability in the relationship. The simple method suggests might see rates as high as the low 6% range.

However, as Lawler noted, the relationship is more complicated than the simple method of comparing to the 10-year Treasury yield, and it also depends on future inflation and the terminal Fed Funds rate. So, 30-year mortgage rates could move even higher.

How do higher mortgage rates impact affordability?

Based on today’s mortgage rates, affordability has declined significantly, see: Worst Housing Affordability" since 1991 excluding Bubble. However, it is important to understand that if mortgage rates double - say from 2.75% to 5.5%, monthly payments do not double - but they do increase significantly.

The following graph shows the year-over-year change in principal & interest (P&I) assuming a fixed loan amount since 1977. Currently P&I is up about 35% year-over-year for a fixed amount (this doesn’t take into account the change in house prices).

Add in the 20% increase in house prices over the last year, and the payment for purchasing the same home is up about 55% year-over-year.

Yesterday, Sam Ro tweeted some analysis from Goldman Sachs on the median monthly payment. This analysis was before the sharp jump in rates today.

"The median monthly payment of a 30-year mortgage is up 56% year-over-year" - Goldman

In summary:

Current 30-year mortgage rates are around 5.85%.

Mortgage rates are probably close to the peak for this cycle (depending on inflation) but might rise to the low 6% range.

Mortgage payments - for buying the same home - are up over 50% year-over-year.

https://calculatedrisk.substack.com/p/30-year-mortgage-rates-increase-to

« First        Comments 20 - 59 of 59        Search these comments

22   AmericanKulak   2022 Jun 13, 1:36pm  

YEEHAH! Crush dem prices - All actors buy the payment. It might appear that Wall Street is paying cash, but that was possible because they financed bigly at low rates to get that cash.
23   ForcedTQ   2022 Jun 13, 1:43pm  

So PMAs have reverted back to where they were pre 2019, when we had just a low level steady appreciation (devaluation of the dollar.) This correction seems agreeable and healthy for the stabilization of the market, no?
25   AD   2022 Jun 13, 2:12pm  

Amazon is near September 2018 levels. That means Amazon stock moved sideways for about 3 and 1/2 years.

Look at other stocks that have been through blood baths like Facebook, AMD, Disney, etc.

Disney is at the same stock price as it was in December 2014 ! ! !

.
26   Blue   2022 Jun 13, 2:27pm  

Stocks might further go down 0 to 40%, but buying at this level is not bad if one wants try dollar cost averaging. They should eventually go up in a year or two particularly in inflationary scenario.
27   zzyzzx   2022 Jun 14, 6:59am  

30 year mortgage rates up to 6.18%
28   zzyzzx   2022 Jun 14, 7:00am  

ad says

Amazon is near September 2018 levels. That means Amazon stock moved sideways for about 3 and 1/2 years.

Look at other stocks that have been through blood baths like Facebook, AMD, Disney, etc.

Disney is at the same stock price as it was in December 2014 ! ! !


Yet still another reason to only buy stocks that pay a dividend.
29   joshuatrio   2022 Jun 14, 7:13am  

zzyzzx says

ad says


Amazon is near September 2018 levels. That means Amazon stock moved sideways for about 3 and 1/2 years.

Look at other stocks that have been through blood baths like Facebook, AMD, Disney, etc.

Disney is at the same stock price as it was in December 2014 ! ! !


Yet still another reason to only buy stocks that pay a dividend.


What stocks do you recommend that pay dividends?
30   FuckTheMainstreamMedia   2022 Jun 14, 7:13am  

exfatguy says

Yet asking prices are still at all-time highs. Clearly, the folks buying homes are paying all cash and don't need peon mortgages. If you need to borrow, you can't afford it.


I think asking prices are the people who psychologically MUST sell at the highest possible point. Refusal to cash in their lotto ticket when they had a chance, now freaking out because the peak passed them but they still want peak money.
31   zzyzzx   2022 Jun 14, 8:13am  

joshuatrio says

What stocks do you recommend that pay dividends?


Personally, I recommend any that pay a dividend vs one that does not. Obviously that would be a mix of dividend aristocrats. But if you want higher yields, yeah a REIT or a covered call ETF would be better if you don't mind not getting any growth.
33   zzyzzx   2022 Jun 15, 7:48am  

Because buyers now are "well qualified"

https://www.advisorperspectives.com/articles/2022/06/14/americans-are-building-vacation-home-empires-with-easy-money-loans

A special kind of business loan is fueling the boom. It lets borrowers, including the self-employed, qualify based not on their salaries but on the projected future income of the property they’re buying. In industry jargon, they’re known as “debt service coverage ratio” loans, referring to the way that rents must be at least enough to cover monthly mortgage payments. Last year investment-property loans without taxpayer backing totaled $9.9 billion, an eightfold increase since 2018, according to industry publication Inside Mortgage Finance’s analysis of mortgage bond offerings. The vast majority qualified because of rental income.

Regular-paying tenants on long-term leases support most of these loans, industry executives and analysts say. But, over the past year, more lenders have started letting borrowers qualify based on what they expect to charge per night for stays booked on sites such as Airbnb and Vrbo, a unit of travel company Expedia Group Inc. Real estate buyers can generate much more income renting a property out for hundreds of dollars a night than they could through a lease to a long-term tenant, at least for now. So would-be owners, some of whom are young and just getting started, can afford increasingly expensive property.
34   zzyzzx   2022 Jun 15, 7:56am  

https://www.cnbc.com/2022/06/15/mortgage-demand-is-now-roughly-half-of-what-it-was-a-year-ago-as-interest-rates-move-even-higher.html

Mortgage demand is now roughly half of what it was a year ago, as interest rates move even higher
35   exfatguy   2022 Jun 15, 9:40am  

I don't care what the interest rate is as long as the house price and monthly payment reflect my ability to pay. So if rates go up and monthly payments go up, the price of the house would need to go down. But that's not going to happen because people aren't buying houses with mortgage money. It's all cash. So F me.
36   B.A.C.A.H.   2022 Jun 16, 8:02am  

I described this sh*tbox near where I live that I sometimes drive past. It was clearly a ®ealtor's "pocket listing" because the sign only appeared in front of the home after it sold. In spite of how butt-ugly the home appears, the photo on the ®eal Estate Website does not do justice to what an awful property it is. Note the sale date: May 5.
https://www.zillow.com/homedetails/1785-Hopkins-Dr-San-Jose-CA-95122/19727040_zpid/

Here is another one I drive past that had a sign recently appear, only one month later. This time, not a pocket listing. Much less "undesirable" listing than the other in different aspects. I drive past this one frequently, including a few times during weekend "open houses". I saw no "traffic" during those open house hours.
https://www.zillow.com/homedetails/2681-Pixanne-Ct-San-Jose-CA-95148/19730892_zpid/

It's only been a month. Times are changing!
39   1337irr   2022 Jun 16, 10:37am  

What's interesting is the hard money loan guys...

I have a friend that did a flip and is trying to sell the house for $925K in Austin.
40   porkchopXpress   2022 Jun 16, 6:07pm  

1337irr says

I have a friend that did a flip and is trying to sell the house for $925K in Austin.

He fooked
41   AmericanKulak   2022 Jun 16, 6:12pm  

$2500/month is over a third of pretax Median Income of $72k
42   AD   2022 Jun 16, 7:33pm  

zzyzzx says




Yeah I remember a real estate agent telling me that it would take at least 15 years to get back to 2006 price levels for real estate, and in some zip codes it would take 20 years.

.
43   Ceffer   2022 Jun 16, 7:59pm  

B.A.C.A.H. says


Here is another one I drive past that had a sign recently appear, only one month later. This time, not a pocket listing. Much less "undesirable" listing than the other in different aspects. I drive past this one frequently, including a few times during weekend "open houses". I saw no "traffic" during those open house hours.
https://www.zillow.com/homedetails/2681-Pixanne-Ct-San-Jose-CA-95148/19730892_zpid/


Is this in the Vietnamese area? No love for honkeys in some of those areas.
44   Blue   2022 Jun 16, 10:33pm  

HunterTits says


Because houses would have to sell at $75k or so for anyone to be able to buy.

Thia is one good reason why the interest rates should not be maintained artificially too low for tool long. It distorts the market.
45   B.A.C.A.H.   2022 Jun 17, 6:34pm  

Ceffer says

Is this in the Vietnamese area? No love for honkeys in some of those areas.

There are Asian racists in San Jose and the SF Bay Area. But they are not Vietnamese, not at all. Nowadays the Vietnamese who move into formerly low income neighborhoods work super hard, maintain their homes, mind their own business, and are model neighbors as they gentrify former gangster neighborhoods. Very common their kids date and marry into other races.

And the racist Asians are not so racist against whites. (Some have complained on Patrick.net they're racist against whites in the workplace. I'm not referring to workplace stuff). The racism is the fear of blacks and contempt of Mexicans. (Don't you know, Mexicans are people to be exploited?).
46   Ceffer   2022 Jun 18, 12:41pm  

Both the canary in the coal mine homes for sale in my tri-valley hood have dropped their prices by 100K apiece so far. That was quick. It's the interest rate put.

My idiotic and usually wrong prognosticator predicts they will both fall at least another 200K before selling (if they sell).
47   GNL   2022 Jun 18, 3:01pm  

Ceffer says

Both the canary in the coal mine homes for sale in my tri-valley hood have dropped their prices by 100K apiece so far. That was quick. It's the interest rate put.

My idiotic and usually wrong prognosticator predicts they will both fall at least another 200K before selling (if they sell).

Your prediction is they both fall $300K before selling? Wow, what was the starting asking price?
48   1337irr   2022 Jun 18, 3:14pm  

Flippers gonna flip...

If everybody is flipping houses, then who is really buying?

This is one of my favorite book's from my childhood, oddly it teaches economics and the idea of specialization. We don't need the majority of all occupations in the US to be involved with real estate.

https://www.amazon.com/If-Everybody-Did-Ann-Stover/dp/0890844879
49   B.A.C.A.H.   2022 Jun 18, 4:44pm  

Ceffer says

Both the canary in the coal mine homes for sale in my tri-valley hood have dropped their prices by 100K apiece so far. That was quick. It's the interest rate put.

My idiotic and usually wrong prognosticator predicts they will both fall at least another 200K before selling (if they sell).

Yep.

I reckoned the recent Tri-Valley purchase by our friend who follows these threads was a Capitulation, much like surferex's back in the day. Capitulation signals a top.
50   Ceffer   2022 Jun 18, 7:04pm  

Just like every other downturn, things go off a cliff pretty fast, like the whole herd has a seizure all at once. The bright side is that absolute prices will also drop for cash customers
51   AmericanKulak   2022 Jun 18, 7:52pm  

Loving the price drops in my targeted area. 5-10% the past month or so.

Great thing is that most condos there imposed the 1/1 rule: No renting for 1 year, no leases for less than 1 month. This keeps the Blackrocks, the Landlords, and the VRBO/BNB schmucks out.

One or two years and I'll snatch up a bigger place.
52   B.A.C.A.H.   2022 Jun 18, 8:00pm  

Ceffer says

The bright side is that absolute prices will also drop for cash customers

High housing cost, which trickles down to rent, has made life miserable here for so many. More than the high taxes and wokersterism the high housing cost has driven away jobs and dynamism of Silicon Valley that so many Cool Aid drinkers crow about.

If the prices plummet it's good news for many people, good news for the region.
53   Patrick   2022 Jun 18, 10:27pm  

B.A.C.A.H. says

If the prices plummet it's good news for many people, good news for the region.



I agree, but you will not convince even one single "homeowner" with logic.
54   Booger   2022 Jun 19, 11:04am  

https://www.cnbc.com/2022/06/19/why-lgbtq-homebuyers-say-rising-mortgage-rates-are-hitting-them-hard.html

Why LGBTQ homebuyers say mortgage rates are hitting them especially hard
55   RC2006   2022 Jun 19, 11:34am  

Booger says

https://www.cnbc.com/2022/06/19/why-lgbtq-homebuyers-say-rising-mortgage-rates-are-hitting-them-hard.html

Why LGBTQ homebuyers say mortgage rates are hitting them especially hard


No kids to pay for lol whiney bitches have no responsibilities. Did the price of aids medications go up impacting thier ability to pay a mortgage or something?
56   Ceffer   2022 Jun 19, 12:33pm  

Booger says

Why LGBTQ homebuyers say mortgage rates are hitting them especially hard

I thought they liked getting spanked, especially in front of school children.

Gay tech guy at t mobile yesterday was saying how they have promotional gifts every month, including LGBTQ rainbow beach towels. I had to keep from smirking, like I would ever be caught dead with such a thing.
58   GNL   2022 Jun 21, 10:32am  

HunterTits says


WineHorror1 says


$18,000 is a big price drop?


For a $400k home, yes.

Esp since our resident RE 'experts' claimed that none of this should be happening.


That's about 4%? We need to retrace all the way to about 2018 or so. Maybe even 2012. Before they juiced the market since the market never did recover organically.

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