THE BIG SPLASH

Mortgage Rates Do a Triple Jump

Mortgage rates have skyrocketed to their highest levels in over two decades, with the 30-year fixed-rate mortgage averaging 7.09%, causing a stir in the housing market.

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• The surge in rates, attributed to the economy's unexpected performance and the rise in the 10-year Treasury yield, has impacted the aspirations of numerous potential homeowners, leaving many on the sidelines for months.

• Sam Khater, Chief Economist at Freddie Mac, explained that this situation is a consequence of the economy performing better than anticipated and the increase in the 10-year Treasury yield, which has led to the upward trajectory of mortgage rates. He emphasized that while affordability challenges have affected demand, the primary factor stifling home sales is the persistently low inventory.

• Comparing this rate escalation to a year ago, the difference is stark. A year prior, the 30-year fixed mortgage rate averaged 5.15%, illustrating the drastic change that has occurred. This steep rise has significant implications for prospective homebuyers.

• The impact of these elevated rates is an affordability crisis, translating to a considerable 39% decrease in home affordability, according to Ted Rossman, a senior industry analyst at Creditcards.com. This means that if someone could afford a $375,000 house when rates were at 3%, they could now only afford a $230,400 house.

• For potential buyers, this translates into higher prices and a market characterized by low inventory. This situation is particularly tough for first-time buyers who are hit by both rising prices and elevated interest rates. Rossman also highlighted that existing homeowners are grappling with a unique challenge.

• Many of them have mortgage rates below 5%, which makes them reluctant to sell their current homes as they might end up with a higher mortgage on a new property due to the increased rates. This dilemma is contributing to the persistently low housing inventory and consequently driving up prices even further.

A SCOOP OF CHINA CRISIS

China's real estate crisis, stemming from a crackdown on risky business behavior, is spreading its fallout to the broader economy.

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• The Chinese real estate sector has been a major driving force for the country's economy for decades, accounting for over a quarter of all economic activity.

• However, excessive borrowing and overbuilding have left the market vulnerable. The housing slowdown and defaults among developers have led to decreased consumer spending, disappearing jobs in housing-related sectors, and a slowdown in economic activity.

• The crisis has also affected financial institutions and stock markets. Despite calls for a major rescue package, Chinese policymakers have taken modest measures to address the situation, leaving investors and the economy anxious about the potential for a larger crisis.

• The real estate troubles have also caused confidence to plummet in Hong Kong's stock market, and concerns are growing about the stability of China's financial system as the crisis deepens.

A SCOOP OF LOTTERY

An affordable housing lottery has been launched for Enclave at The Cathedral, a 430-unit apartment building in New York City.

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• The building is situated near The Cathedral Church of St. John the Divine and offers a mix of studios, one-bedroom, and two-bedroom units.

• The lottery includes 87 units for residents with incomes at 130 percent of the area median income (AMI) and 87 units at 60 percent of the AMI. Monthly rents range from $867 to $1,204, catering to a diverse range of income levels.

• The Enclave project had faced controversy when introduced in 2014 due to concerns about overshadowing the historic church, but its amenity-rich offerings are now drawing attention.

• Amenities include pet-friendly policies, laundry facilities, a screening room, game room, roof deck, fitness center, and more.

• While some initially criticized the project, those who secure a spot in Enclave are likely to appreciate its modern amenities and affordable housing options.

A SCOOP OF MARKET ANALYSIS

A recent study by Redfin has revealed that warm weather and the cost of living are driving Americans to consider moving.

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• The study tracked over 2 million people searching for new homes from April to June 2023. Cities with warm climates dominated the list of most popular destinations for potential relocations.

• Phoenix stood out as a top choice, second only to Las Vegas, which is attracting those from more expensive coastal cities.

• San Francisco, New York, and Los Angeles saw the highest number of residents and homebuyers leaving for other locations.

• Despite a decade of rising home prices, cities like Phoenix, with a median home price of $464,000, remain attractive compared to cities like Seattle with a median price of $793,000 or San Jose with a median of $1.8 million.

• Florida's population growth has also contributed to its cities, including Orlando, Tampa, North Port-Sarasota, Cape Coral, and Miami, making it to the list of popular destinations.

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