7.09%! US mortgage rates rise to a 20-year high, real estate market cools significantly

According to Dolphin Research APP, on Thursday, the US housing finance institution, Fannie Mae, stated in a declaration that as of August 17th, the average interest rate for 30-year fixed-rate mortgages in the US was 7.09%, higher than last week's 6.96%, reaching the highest level since April 2002.

Generally speaking, mortgage interest rates are "indirectly related" to the central bank's monetary policy, and they often fluctuate with changes in the "anchor of global assets" - the yield of benchmark 10-year US Treasury bonds. On Wednesday, the yield on 10-year US Treasury bonds reached the highest level since 2008. Sam Khater, Chief Economist at Fannie Mae, said, "The US economy continues to outperform expectations, and the rise in the yield of 10-year US Treasury bonds has led to an increase in mortgage interest rates."

In the case of the Federal Reserve implementing aggressive tightening policies to combat inflation, the real estate market is the most directly affected sector. Higher borrowing costs have put both buyers and sellers in a wait-and-see mode, and the real estate market has clearly cooled down.

According to data from Black Knight Inc, recent increases in borrowing costs, coupled with severe inventory shortages, have pushed up housing prices and suppressed housing affordability to the lowest level since 1984. In addition, the shortage of housing supply, rising costs, and concerns about the economy have hindered many potential buyers, leading to a decline in sales of existing homes. Sam Khater added, "Demand has been affected by unfavorable affordability factors, but low inventory remains the fundamental reason for the stagnation of home sales."

The US real estate market may continue to cool down as policymakers may continue to implement tightening policies. In the minutes of the July meeting released on Wednesday, the Federal Reserve expressed concerns about the pace of inflation and stated that more rate hikes may be needed in the future unless the situation changes. The minutes stated, "Because inflation remains well above the Committee's longer-run objective and the labor market is still tight, most participants continue to see significant upside risks to inflation, which could require further tightening of monetary policy."