Mortgage Rates Jump Even Higher After Positive Jobs Report.
The good news is Americans are making more money – because they're going to need it, especially people thinking about buying a home.
While the just-released January employment report showed job growth that topped expectations, to go along with a nice gain in wages, it also sent bond yields soaring. Mortgage rates loosely follow the yield of the 10-year Treasury. Bond yields have been rising for weeks on strong economic data domestically as well as changes in international monetary policy, but this move was the most dramatic.
The average rate on the 30-year fixed-rate mortgage is at its highest level in four years, about 4.50 percent, and for some lenders, it is even higher.
For those out house hunting already, the higher rates will only add to the weakening affordability in the market. Home prices continue to move higher at three times the rate of wage growth.
Prices are also growing fastest at the lowest end of the market, where entry-level buyers have even less ability to increase their buying budgets. These buyers are also far more mortgage-dependent than those at the high end.
Of course, mortgage rates are still historically low, looking back over the past few decades. Rates have soared higher than 10 percent in the past, and the market survived.
The difference now is that home prices over the past few years have been able to gain so much because borrowing costs were so low. What's pushing prices higher now, however, is not low rates, but a severe lack of supply. That means higher rates are unlikely to put any chill on the rise in prices. Demand for housing is still strong, but buyers today will have to dig deeper to become homeowners.
Courtesy of Rick Lombardo 310.435.7439, Rick.Lombardo@grarate.com, VP of Mortgage Lending at Guaranteed Rate.
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