After a week of dismal housing data, a silver lining perhaps. The spike in U.S. mortgage rates since the November presidential election has been cut in half.
As Bloomberg notes, the average rate on a 30-year fixed mortgage dropped in the week ended Thursday to a six-month low of 3.95 percent, according to Freddie Mac data.
In the seven weeks after the election, borrowing costs increased by 75 basis points to 4.32 percent at the end of December, the highest since April 2014.
They’ve since managed to retreat 37 basis points - potentially good news for homebuyers and builders as the spring selling season continues to disappoint.
As MishTalk's Mike Shedlock reminds us: Lawrence Yun, NAR chief economist, says “Demand is easily outstripping supply in most of the country.”
How long can Yun’s silly argument go on?
There is not a supply shortage. Rather, there is a supply shortage of homes people can afford at which buyers are willing to sell. If homes were priced to sell, more homes would sell.
Despite rising prices, buyers want higher prices than they can get. At some point, rising prices were bound to choke off sales.
It’s too early to conclude a sustainable downtrend in housing has started, but if it has, it would be on top of an overall slowdown in consumer spending led by a slowdown in auto sales.
Here is my estimate of the economic and Fed consensus: Don’t worry, it’s just a temporary soft patch in March, April, and May. The second quarter half recovery is still on schedule.