Real estate markets around the world are taking a breather… This is indicated by some positive data issued from the United States, which dispelled in the short term the fears of a repeat of the mortgage crisis that hit the world in 2008.
The US real estate market had received several negative signals during the past months, whether with regard to home sales or mortgage rates, affected by the tightening monetary policy that the Federal Reserve pursued during the current year to curb inflation, but the real estate sector regained some momentum after data showed a slowdown in the inflation rate. During October to 7.7%, less than expectations.
Mortgage rates for 30 years
Data issued by the Association of Mortgage Bankers in the United States revealed that the mortgage rate for 30 years decreased to 6.9% on November 11, compared to 7.14% on November 4, and the mortgage rate had reached 7.16% on October 21. This is the highest level in more than 20 years, and this decline comes after inflation subsided 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 November 9 to 205.2 on November 16, although the index is still near historical lows.
Home sales… negative signs
The indicators of existing home sales in America continue to give a negative picture of the real estate sector. According to the latest data, sales of these homes decreased to 4.71 million homes in October, reaching its lowest level since June of 2020.
The American labor market maintains its solidity
The non-farm private sector added 233,000 jobs in October, beating expectations of an addition of only 200,000. Wage growth remains strong, which means homeowners can pay their mortgages and won’t be forced to sell homes, as happened in the 2008 global financial crisis.
So, there is no doubt that the housing market will be one of the sectors that will be negatively affected by the increase in interest rates because mortgage rates will stand in the way of investors, but there is also no doubt that the return of the mortgage disaster in America that occurred in 2008 will not be soon. Not least due to the strong jobs data as well as expectations that the Federal Reserve may slow down the pace of interest rate hikes.
Bashar Al-Jaraatly
Market analyst at CNBC Arabia