Tension grows in the housing market
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Why are mortgage rates above 7% and how is that affecting home‑buyer demand?
Bonds. That's it. That's the hole open. Bonds From American Public Media. This is Marketplace.
In Los Angeles, I'm Kai Risdall. It is Wednesday today. This one is the 23rd of September. Good as it always is to have you along, everybody. We're gonna spend, I don't know, the first ten or eleven minutes of the program today, directly or indirectly on bonds. And what I want you to do every time you hear that word today is think of it as the cost of money. Bonds get sold and bonds get bought with an eye toward their yield. The interest rate, whoever issues the bond has to pay. And the yield on the tenure treasury bond today hit Five point one three five percent. Apologies for going to the third decimal place there, but when a government is borrowing the way this government is borrowing, thousandths of a percentage point really matter.
So, our indirect approach to bonds today comes via the mortgage market, where the 30-year fixed rate mortgage now sits at almost 7.2%, a two-year high. Meanwhile, and to absolutely nobody's surprise, the Mortgage Bankers Association says mortgage applications have dropped for the third week in a row. And as marketplaces have rebenishure reports now to get us going, those two data points mean some things are happening in the housing market.
So demand for homes is down, which makes sense. Buyers aren't thrilled about buying when mortgages are this high, but something else a little weirder is happening too.
We're also seeing more homeowners deciding to list their homes.
Daryl Fairweather is chief economist at Redfin.
Either these sellers are just tired of waiting because it's been so long that mortgage rates have been high. And if they're waiting for a better market, maybe they realize that that better market Isn't coming, or they are getting nervous that prices might fall.
More sellers equals more supply, and you add in slowing demand, and home prices have slowed down, rising just 2% yearly, which is slower than overall inflation and slower than wage growth. And that would be great, except for the high mortgage rates. Ali Wolf is chief economist for Zonda.
Since the start of the year, consumers have lost roughly 10% in purchasing power just from higher interest rates.
When demand is like this and prices aren't rising much, builders aren't interested in building new homes. Dinoushka Naniakara does forecasting for the National Association of Home Builders.
Their permits numbers are down, the starts numbers are down here to date.
And building a home is kind of a long term thing. So home builders usually look past short term bumps in the road, like a flare up of mortgage rates. But they are not looking past it because it isn't a short term thing.
In our forecast, we don't have the mortgage rate. Coming close to six or below six in the next two-year window.
There are some silver linings. If you're a seller, prices are at least still generally rising. If you are lucky enough to be able to buy, two out of three home builders are offering discounts to offset higher mortgages, and there are fewer bidding wars. In New York, I'm Sabri Beneshore for Marketplace.
What does the rise in mortgage rates mean for the broader bond market?
Wall Street today.
Bonds were selling off, stocks were selling off, oil was being bought. We will have the details when we do the numbers.
Our direct approach to bonds today is the new book from Robin Wigglesworth at the Financial Times. It's called A Fabulous Debt: The Epic Story of How Bonds Built the Modern World. It's all about the historical and also the very current context in which the bond market operates. Robin, it's good to have you on. No, thanks, guy. Thanks for having me here. Uh everybody listening to this program, 'cause they've heard me say it a million times, knows what a bond is, right? It is uh uh people loaning governments, companies, take your pick, uh money, and then the expectation is they get paid back. You though have spent three hundred and fifty something pages saying it is oh so much more than that. Um discuss, would you?
Yeah, I mean the bond market is often seen as the the boring sibling to the stock market.
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Chapters
8 chapters
1
Why are mortgage rates above 7% and how is that affecting home‑buyer demand?
0:02–3:27
2
What does the rise in mortgage rates mean for the broader bond market?
3:27–6:31
3
How are higher rates changing home‑builder activity and new‑home permits?
6:31–9:59
4
Why is the bond market considered the hidden wiring of the global economy?
9:59–13:33
5
What is driving the current “running boom” and how does it compare to past surges?
13:33–16:42
6
How are music residencies reshaping live‑concert economics for artists and fans?
16:42–20:07
7
Why has Nashville hot chicken become a global phenomenon and what’s its cultural impact?
20:07–22:49
8
What do the latest market numbers (PMI, stock moves, bond yields) tell us about the economy’s direction?
22:49–26:20