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The swift closure of two major banks sent shockwaves through the financial system, pushing mortgage rates down enough to potentially lure buyers back to the housing market.
The 10-year Treasury yield has fallen nearly 40 basis points since last Wednesday, while the average 30-year mortgage dropped from 7% on Thursday to 6.57% on Monday, Yahoo Finance reports. The 10-year yield was hovering around 4% on March 10, but as of Tuesday afternoon it was sitting just above 3.6%.
The fall could stoke homebuyers appetite, after months of prohibitive rates, though it is not clear if rates will bounce back up.
“There's still a lot of uncertainty but in the near term, I do expect mortgage rates to drop,” Redfin Chief Economist Daryl Fairweather told the publication. “And I expect buyers to take advantage of those mortgage rates because we've seen buyers be incredibly sensitive to those interest rates.”
Other experts noted that the current decrease in rates would only slightly improve the cost of housing for the average buyer, and if the drops are only short-term, they won't make a measurable impact on the market.
Soaring prices, followed by sharp interest rate increases, have forced many would-be buyers from the market, driving up rents and continued investor demand for multifamily properties. In the last quarter of 2022, the number of housing units for rent that started construction outpaced the number of for-sale single-family housing starts for the first time ever, according to the U.S. Census Bureau's latest housing report.
Rents have soared across the country since 2021, and even with expectations of a softening have only climbed higher in some of the most expensive parts of the country. In New York City, for example, the average rental price in Manhattan hit $5,186 last month, an almost 1% increase from a month earlier and an all-time February record, according to Douglas Elliman research.
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