WASHINGTON, DC — With mortgage rates currently at a 23-year high and mortgage application activity down to its lowest level since 1996, a trio of housing-related trade associations and banking groups are calling on the Federal Reserve to signal its intent that it will not raise interest rates further.
The National Association of Home Builders, Mortgage Bankers Association and National Association of Realtors this week sent a joint letter to the Fed’s Board of Governors to convey “profound concern that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”
“This has exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume,” the letter stated. “These market challenges occur amidst a historic shortage of attainable housing.”
According to the Washington, DC-based NAHB, the current spread between 30-year mortgage rates and the 10-year Treasury yield is at historically high levels, and the difference between the current spread and the long-run average indicates mortgage rates for home buyers across the country are at least 120 basis points higher than they otherwise would be, costing home buyers an extra $245 in monthly payment on a standard $300,000 mortgage. The leading source of inflation in recent months has been increases in shelter costs, the NAHB added.
“The most effective approach to tame shelter costs, and assist on the broader inflation fight, is to facilitate the construction of attainable, affordable housing,” the letter said. “Sustained wide spreads or further increases in interest rates make this economic goal more challenging by limiting lot development and home construction, exacerbating housing supply, and pricing out millions of households from the goal of homeownership.”