MORTGAGE RATES EASE SLIGHTLY

The average interest rate for a 30-year, fixed rate mortgage loan settled back to 5.70 percent during the week ending 30 June, down from 5.81 percent the week before, the Federal Home Loan Mortgage Corp. reported.

The rate still is approaching twice the 3.22 percent where rates began this year and remain close to its highest since 2008.

In April, a U.S. household making the national median income would have spent 41.2 percent of its gross income to make mortgage payments on a median-priced home, according to a study last month by the Federal Reserve Bank of Atlanta.

The figure is higher than the 30.8 percent calculated in April 2021 and the highest proportion since 2006.

Households should spend no more than 30 percent of their gross income on housing, financial advisors typically say.

Still, the housing market remains feverish, with 60 percent of houses sold in May selling above their asking price, online brokerage Redfin reported.

However, mortgage originations this year are predicted to fall 40 percent below 2021’s volume, shot down by a 69-percent decline in refinancing applications, the Mortgage Bankers Association said.

Mortgage lenders from online lenders such as Better.com to JPMorgan Chase and other megabanks are laying off thousands of mortgage bankers, Business Insider reported.

TREND FORECAST: For well over a year, we repeatedly predicted that when the U.S. Federal Reserve raised its federal funds interest rate to or above 1.5 percent, the housing market would decline. And should mortgage rates hit above 8 percent, there will be a sharp decline. 

We were correct.

The housing market is already out of reach for modest- and middle-income buyers because the available supply of mid-price homes for sale was relatively small and disappeared quickly during the housing frenzy of the last 18 months.

At the same time, lenders have tightened their standards and fewer families could secure a mortgage.

Now the crash has found its way to the mortgage industry, with fewer loans in lenders’ portfolios and former bankers looking for work.

Only the high end of the real estate market will survive in relatively good shape. 

High earners and the well-off will continue to be able to afford high mortgage payments. 

Also, the number of homes for sale will remain small relative to demand: some people have no interest in moving, while others are not willing to sell their current home only to have to pay top dollar to buy another. 

TREND FORECAST: We have also forecast, beyond the housing and apartment real estate sectors, there will be a devastating crash of the commercial business sector as interest rates rise, loan payments escalate while more people work at home and renters cut back on leased spaces.  

There will also be a sharp price decline of commercial real estate in big cities where less people commute to work and office occupancy rates trend below 80 percent.