Real estate markets around the world are taking a breather… This is indicated by some positive data released by the United States, which in the short term have dispelled fears of a repeat of the mortgage crisis that hit the world in 2008.
The US real estate market had received several negative signals in recent months, both in terms of home sales and mortgage rates, conditioned by the restrictive monetary policy that the Federal Reserve has pursued in the current year to curb inflation, but the housing sector recovered some momentum after data showed a slowdown in the rate of inflation. In October at 7.7%, lower than expectations.
Mortgage rates for 30 years
Data released by the Association of Mortgage Bankers in the United States revealed that the 30-year mortgage rate fell to 6.9% on Nov. 11, from 7.14% on Nov. 4, and the mortgage rate had reached 7.16% on October 21st. the highest level in more than 20 years and this decline comes after inflation eased in October, which led to a decline in bond yields.
Mortgage market index
The Mortgage Bankers Association’s mortgage market index rose from 199.9 on Nov. 9 to 205.2 on Nov. 16, although the index is still near record lows.
Home sales… negative signs
Existing home sales indicators in America continue to paint a negative picture for the housing sector: according to the latest data, existing home sales fell to 4.71 million homes in October, reaching the lowest level since June of 2020.
The American labor market remains solid
The nonfarm private sector added 233,000 jobs in October, beating expectations of a mere 200,000 addition. Wage growth remains strong, meaning homeowners can pay off mortgages and won’t be forced to sell homes, as happened during the 2008 global financial crisis.
So, there’s no doubt that the housing market will be one of the sectors that will be negatively impacted by rising interest rates because mortgage rates will hobble investors, but there’s also no doubt that mortgage yields will spell disaster in America. that occurred in 2008 will not happen any time soon, not least due to strong jobs data and expectations that the Federal Reserve may slow the pace of interest rate hikes.
Bashar Al Jaraatly
Market analyst at CNBC Arabia
