“You don’t need a Ph.D. in economics from the University of Chicago to understand that 7% mortgage rates are a threat to the U.S. housing market.
We’re already seeing it. On Tuesday, we learned that mortgage purchase applications fell 13% last week. That’s starkly sharper than the 1.1% decline we saw in the previous week. The difference? Last week’s 13% mortgage purchase application decline coincided with the first weekly 7% mortgage rate reading since 2002.
Sure, historically speaking, there’s nothing abnormal about 6% or 7% mortgage rates. But the numerical rate overlooks the impact of the ongoing mortgage rate shock: These rates, coupled with frothy home prices, put new monthly payments in the upper bounds of history. When accounting for income, it’s more expensive to buy now than it was at the height of the ’00s housing bubble.
This heightened affordability crunch already has economists and housing analysts alike downgrading their U.S. home price outlooks. Look no further than Moody’s Analytics.”.
