Jan 04, 2019

Housing Trends

Lower Mortgage Rates = $20,000 Back To Buyers

Market volatility, alarming headlines, and price ceilings worked against the housing market in the second half of 2018. Combined new home contracts for August, September, and October of 2018 were below the same period in 2017 for the top markets. Talking about “rising rates” is the new standard for housing, but our Director of Economic Research, Ali Wolf, reveals some surprisingly good news for 2019’s housing market.

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Mortgage rates and the yield on 10-year Treasury notes are highly correlated. The latter hit a 7-year high in November, the same week mortgage rates shot up to just under 5.00%*. Since then, both have retreated. Mortgage rates are 9% below 2018 highs and now sit at 4.51%.

Consumers Have 5% More
Buying Power

With 50 Basis Point Drop In Mortgage Rates

The nearly 50 basis point drop in mortgage rates over the past seven weeks translates to 5% more consumer buying power. To quantify the impact, we took the median single-family detached new home price for select markets and calculated the amount consumers got back from the recent reversal in mortgage rates**.  As the graph below shows, the reduction in rates can result in consumers being able to add as much as $30,000 to their purchase price for the same monthly payment as when rates were at their highest in November for the markets we covered.

Lower rates will help the housing market as we start the new year and should be used in marketing collateral and sales centers to reignite buyers in the short run.

*The high was 4.94% according to Freddie Mac’s weekly survey. 
**Based on a prime buyer who earns 20% more than the median household income in the respective metro and can put a 20% down payment. The calculation excludes any HOAs, but includes PITI.

Contact us to discuss your best strategy for retaining buyers in this dynamic market.

Featured Writers

We cover topics around housing, policy, markets, and technology.

Ali Wolf

Director, Economic Research

Ali Wolf

Director, Economic Research


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