30Y Mortgage rate 6.91%, highest level since early July. AND NO, INTEREST RATES ARE NOT COMING DOWN

[nmmi]

US 30-year fixed-rate mortgage flirts with 7%, Reuters, 1/2/25
The average rate on the popular 30-year fixed-rate mortgage increased to 6.91%, the highest level since early July, from 6.85% last week, mortgage finance agency Freddie Mac said on Thursday. It averaged 6.62% during the same period a year ago.

(snip)

They have risen in tandem with U.S. Treasury yields amid a resilient economy and investor fears that President-elect Donald Trump's proposed policies, including tax cuts, higher tariffs on imported goods and mass deportations, could reignite inflation.

((rates were rising well before the November 5 election, so it's not entirely "The Trump Trade" -nmmi))

Mortgage rates track the 10-year Treasury note. ...

More: https://finance.yahoo.com/news/us-30-fixed-rate-mortgage-173752445.html

30 Year Mortgage rate graph
https://fred.stlouisfed.org/series/MORTGAGE30US

As for the common meme "interest rates have been going down"

Measured from when the Fed's first rate cut occurred on September 19, that's true for Treasuries with less than a year to maturity
e.g. 3 month at https://www.cnbc.com/quotes/US3m

1 year is about breakeven https://www.cnbc.com/quotes/US1Y

above one year, they are all way higher than their September 19 levels when the first rate cut occurred...
2Y https://www.cnbc.com/quotes/US2Y
5Y https://www.cnbc.com/quotes/US5Y
10Y https://www.cnbc.com/quotes/US10Y
30Y https://www.cnbc.com/quotes/US30Y

Despite Fed rate cuts Sept 19 (-0.50%), Nov 9 (-0.25%), Dec 19 (-0.25%)
https://www.federalreserve.gov/monetarypolicy/openmarket.htm

[dem4decades]

1. What do you mean interest rates aren't coming down?

Eggs are going to be a dollar a dozen, gas will be a buck a gallon, under Trump's new Healthcare plan, insurance will be just about free, we won't be paying taxes and everyone is going to get a pony. Why won't interest rates go down?

[nmmi]

2. "Why won't interest rates go down?" - because ponies are very high maintenance items, a crushing economic burden

that will push pony-care inflation to stratospheric levels. And when they become horses, inflation will be at least low-earth-orbit high.

and everyone is going to get a pony. Why won't interest rates go down?

[Jrsygrl96]

3. I guess it's only old fogies like me who remember

Our first home mortgage in 1989 was 10.25% for 30 years. Our second home mortgage in 2002 was 7% for a 30 year mortgage. We refinanced down to 3% during the Obama years, and now after nearly 23 years it’s almost paid off. So, it’s gets me a bit steamed that people talk like mortgage rates are higher than they’ve ever been, because they’re NOT!

[nmmi]

4. My post didn't say that "like mortgage rates are higher than they've ever been"

the OP post said they are the highest in about 6 months which is a lot shorter than "they've ever been".

With my house, purchased in mid-1980, I very fortunately assumed an old 9% mortgage, put about 25% down, and financed the rest with a 12% contract for deed with a 3 year balloon. So yes, I'm extremely very well aware that interest rates are much lower now than bak then.

Note also that house prices are considerably higher, as a multiple of median and average annual wages, than they were back in 1980.

This post from 2022 --
Median house price was 3x median income in the 80s, it's close to 7x now
https://www.democraticunderground.com/100216658196#post8

So, it’s gets me a bit steamed that people talk like mortgage rates are higher than they’ve ever been, because they’re NOT!

[Fiendish Thingy]

5. Good!

High mortgage rates have a downward pressure on house prices, and make it much less attractive and profitable for private equity funds to snap up single family dwellings and rent them out at exorbitant rates.

[nmmi]

6. No, its not good. Yeah, the aspect that private equity and corporate owners will have a tougher time is nice,

but unfortunately so will ordinary people trying to buy a house, or hoping to refinance.

Despite higher mortgage rates than a year ago, for example, house prices are higher, so the mortgage payment is higher. On top of higher property taxes and insurance rates.

https://ycharts.com/indicators/us_existing_home_median_sales_price
From Nov 30, 2023 to Nov 30, 2024 (latest data), the existing median home sales price is up from $387,800 to $406,100, an increase of 4.7%.

Private equity will manage just fine. Unfortunately, not the average person.

Homelessness rates have increased 33% in the last 2 years
https://www.democraticunderground.com/10143362703

[Fiendish Thingy]

7. If people can't qualify for mortgages at current prices, prices will have to come down

Or the market will collapse.

Sure, there are some cash buyers, but even with equity and corporate purchases, cash buyers are still the minority.

Low mortgage rates increase demand and that puts upward pressure on prices, because more people can qualify for loans, and there is more competition among buyers, leading to bidding wars. The 4.7% increase in median price this year is barely above inflation. When mortgage interest rates are around 2-3%, as they were during COVID, prices climbed by double digits.

Pro tip: instead of tracking prices, try tracking sales volume, especially region by region- that will tell you more about the state of the market. If significantly fewer homes are selling in a hot Bidenomics economy, that means prices are too high. Eventually, death, divorce and relocation create enough motivated sellers that prices drop. If sales stagnate enough, starving realtors will put tremendous pressure on sellers to lower their prices.

[nmmi]

8. Enough people are qualifying for mortgages to keep prices going up, and have been for years

Pro tip: instead of tracking prices, try tracking sales volume, especially region by region- that will tell you more about the state of the market.

Protip: the reason for low sales volume is because relatively few homeowners are putting their houses on market, because they will then lose the existing lower interest rate mortgage that they have (the "golden handcuff effect" ). That problem will only get worse with higher mortgage rates. Mortgages are not portable: one can't keep their old mortgage rate when buying another home (and the new buyer doesn't get the old mortgage rate either).

https://www.cnbc.com/2023/08/01/why-many-homeowners-feel-trapped-by-low-rate-mortgages.html

Why so many Americans feel trapped in their homes by their low-rate mortgages, CNBC, 8/1/23
Key Points
The recent spike in mortgage rates has created a so-called golden handcuff effect.
Nearly 82% of homeowners feel “locked-in” by their existing low-rate mortgage, according to data from Realtor.com.
In the meantime, the shortage of homes for sale is pushing up prices.

That was more than a year ago, but the same dynamic explains the way low number of houses on the market, and thus low sales volumes, from recent articles I've read. I'm sure I can find more recent ones, and so can you.

Edited to add A Google search restricted to the last 5 months:
https://www.google.com/search?q=home+prices+and+golden+handcuff&num=10&sca_esv=23184657c50a9b5a&sxsrf=ADLYWIJPw2G9gvp3rBJbO-zSYrzTia6AYw%3A1735854171528&source=lnt&tbs=cdr%3A1%2Ccd_min%3A8%2F1%2F2024%2Ccd_max%3A1%2F2%2F2025&tbm=
[/edit]

The 4.7% increase in median price this year is barely above inflation.

Year-over-year Inflation (Nov'24 (the latest) over Nov'23) is up 2.7%
https://data.bls.gov/timeseries/CUSR0000SA0

That's 1.7X the inflation rate. It might seem barely above inflation to you, but to someone buying a home, its quite a burden.

What matters is the mortgage payment and other house-related costs, like property tax and home insurance. I see no evidence of these expenses are about to collapse, or even to fall below the rate of inflation, but we'll have to see what happens after January 20.

[Fiendish Thingy]

9. It only took 8% of borrowers in arrears to trigger the housing collapse of 2008

An accumulation of distressed and motivated sellers (death, divorce, downsizing, job transfer) could bring prices down, even if other owners are reluctant to sell due to “golden handcuffs”.

[nmmi]

10. I don't doubt that an economic collapse is quite possible, and it will solve the inflation problem too (for some time),

but it's not something I would consider "good!"

[Fiendish Thingy]

11. Collapse is bad; conditions, including high mortgage rates, that bring down prices- definitely good. Nt

[nmmi]

12. Only if they bring down mortgage payments, or temper the increase. Otherwise definitely bad if we have mortgage

and other housing costs pushing inflation higher and affordability lower and increasing homelessness. Witness the 33% increase in homelessness in the last 2 years. Do we really want more of that?

Higher mortgage rates will slow housing price increases, may even bring them down, but that does NOT mean mortgage payments will also slow down or decrease. They probably won't.

The notion that raising mortgage rates will bring down mortgage payments is frankly fantasy.