Suddenly, Everywhere You Look, Signs of a Real Estate Market at Peak Bubble

via marketwatch:

So far this year, the 30-year-fixed has averaged 4.43%

Rates for home loans surged along with the broader fixed-income market, pressuring mortgage affordability again even as housing market growth falters.

The 30-year fixed-rate mortgage averaged 4.60% in the August 2 week, according to weekly data from mortgage provider Freddie Mac. The 15-year fixed-rate mortgage averaged 4.08%, and the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.93%. All three products rose six basis points during the week. It was the second straight weekly gain for the popular 30-year-fixed.

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Mortgage rates follow the path of the 10-year U.S. Treasury noteTMUBMUSD10Y, -1.31%  , which has surged as investors have shaken off trade war fears. The Treasury announced that it will increase the amount of debt it sells in its next refunding auction, and is on track to issue over $1 trillion in debt this fiscal year, the most since 2012.

That additional supply is needed in part because of the bigger deficits caused by last year’s tax cut package. But more supply will likely push bond prices down, and when bond prices decline, yields rise.

The recent rate rise comes even as momentum in the housing market appears to be sputtering. Sales of previously-owned homes fell to the lowest point in five months in June, and sales of newly-constructed homes also tumbled. Even the white-hot price growth of the past few years seems to be decelerating.

As MarketWatch reported in June, analysts increasingly think that the current real estate cycle may have run its course….


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