Hi Reader,

The average 30-year fixed mortgage rate ended the week at 6.77%, up from 6.71% the prior week, according to Mortgage News Daily. Freddie Mac reported an average rate of 6.65%, down from 6.67% the week before.

(Mortgage News Daily reflects daily market conditions, while Freddie Mac reports a weekly average based on rates collected earlier in the week, so its numbers tend to lag the market and often differ.)

Why rates moved higher

​The 10-year Treasury ended the week at 4.737%, up 0.041 percentage point, while the 30-year finished at 5.276%. Long-term yields spent much of the week near levels not seen in well over a decade.

(The 10-year Treasury yield is especially relevant to mortgage rates because Treasuries and mortgage-backed securities compete for investor capital. If Treasury yields rise, mortgage-backed securities generally have to offer higher yields to remain attractive, which tends to push mortgage rates higher.)

What made the week interesting was that some of the economic data actually pointed in the opposite direction.

​July housing starts fell 12.4%, much worse than the 6.1% decline economists expected, and industrial production rose just 0.2%, versus expectations of 0.4%. That helped Treasury yields pull back temporarily.

But several bigger concerns kept pushing long-term yields back up.

1. Government debt is becoming a bigger part of the bond-market story.​
Investors are increasingly focused on the long-term stability of a heavily indebted U.S. government. The national debt has now reached $40 trillion, and the 30-year Treasury yield touched levels last seen in 2007.

2. The demand for capital is growing well beyond Washington.​
The WSJ pointed to the enormous amount of borrowing needed to finance AI and data-center construction. More corporate bonds are competing for investors’ money at the same time the government is issuing large amounts of debt.

3. Oil is keeping inflation concerns alive.​
​Oil rose 7% last week, with continuing Middle East tensions adding another source of inflation uncertainty. Meanwhile, PCE inflation is expected to tick higher.​

These factors are echoed worldwide, reflected in bond markets:

The Treasury Department tried to relieve some of the pressure by doubling its planned buybacks of longer-dated bonds to at least $4 billion per operation. The announcement initially sent long-term yields sharply lower, but the move didn’t last: concerns about debt and government spending quickly took over again.

And the Fed is hardly declaring victory on inflation. Minutes from its July meeting showed that many officials said rate hikes could still be needed if inflation fails to decline.​

So the picture right now is a tug-of-war: softer economic data is putting some downward pressure on yields, while government debt, heavy borrowing, oil and inflation concerns are pushing the other way. Last week, the latter won.

Real estate news: New Jersey continues to stand out

​Statewide median home prices were recently running about 4.5% to 5.4% higher than a year ago, while some Monmouth County shore towns have been appreciating 6% to 10% annually. The growth has been attributed in part to year-round demand in shore communities and the appeal of suburban “metroburbs” that combine proximity to major cities with more local amenities.

​As you can see in the recent data, Union County, for example, is appreciating at 7% annually:

NYC one-to-four family financing

One of the exciting features of the current real estate market in NYC for first time home buyers is the increased inventory of one to three family homes in the $1.1 to $1.8m range. Depending on the location, these offer incredible financing opportunities because of the appreciation potential as well as the ability to use rental income to qualify.

​According to the recent Elliman report, new listings are up 23.7% quarter over quarter and up 2.4% annually in Brooklyn.

Home buyers can get non-jumbo pricing on these homes, resulting in more favorable mortgage rates due to the conforming loan caps in NYC:

If you have a buyer considering a one to four unit home in New York City, I can help them come up with the best ways to finance it, given their budget and financial goals.

I hope your week is off to a great start!

-Nicole

P.S. Do you know someone who would like to receive this newsletter? Here's a sign up link you can share.​

Connect with me on these: LinkedIn, Instagram and YouTube.

Nicole Hamilton Bernheimer | NMLS #2354049

nicole@homeownering.com, 917-650-0167

​More about me​