August 24, 2023 | Driving It Home with ABoR's Housing Economist

Mortgage rates edged higher last week amid the rise in the 10-year Treasury yield. Stronger than expected economic data—including resilient consumer spending (with retail sales posting 0.7% MoM growth in July) and an upward revision to 2Q real GDP growth—have led to upheaval in the bond market. The uptick in the 10-year Treasury yield is driven by several factors, including a change in investors’ perceptions that the fed funds rate will remain higher for longer—i.e., the Federal Reserve will not cut rates in the near-term (as previously anticipated) and may in fact raise rates, a decline in investors’ fears for a recession, and an increase in the supply of Treasury securities amid growing federal budget deficits. Treasury yields (and therefore mortgage rates) will likely remain elevated over the near-term as uncertainty over the direction of the fed funds rate persists. The effect of the recent uptick in mortgage rates has not considerably affected sales activity in the Austin MSA, but a moderation in sales will likely appear over the next few weeks as affordability constraints push more buyers out of the market for homeownership. (It is perhaps important to highlight the delay between the time it takes a buyer to obtain mortgage financing and the time to close on a home—which averages one to two months.) In conjunction with the end of the ever-popular spring and summer homebuying seasons, we generally anticipate a cooler fall with respect to listing and sales activity. Download the Audio Transcript + Episode Summary: https://www.abor.com/content/uploads/2023/08/DIH-8-24-23.pdf Download the Buy Vs. Rent Index: https://www.abor.com/buyrentindex Access the One-Page Customizable Buy Vs. Rent Index Summary: https://www.abor.com/customizables Connect with us on socials: https://www.abor.com/socials Connect with Dr. Clare Losey on LinkedIn: https://www.linkedin.com/in/clare-losey