High Mortgage Rates and Elevated Uncertainty Slow Residential’s Recent Momentum
Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Resales Retrench as Mortgage Rates Stay High
A chill swept through the housing market in January. Existing home sales declined 4.9% to a 4.08 million-unit pace during the month, ending a three-month streak of gains. January’s retrenchment may be owed to harsh winter weather, as cold temperatures kept buyers sidelined. Prospective home buyers may have also become hesitant as a result of increased economic policy uncertainty following the election.
The main driver behind the monthly decline, however, was likely renewed upward pressure on mortgage rates. Despite several federal funds rate cuts from the Federal Reserve, mortgage rates are still close to 7%, essentially unchanged compared to the start of last year. In addition to high rates, low supply continues to drive up home prices and worsen affordability for buyers.