US mortgage rate policy impact

What happened: U.S. mortgage rates, influenced by Federal Reserve policy, have surged, making home purchases and refinancing less affordable. As of April 2023, three in five homes listed since January remained unsold due to high mortgage rates, with application denial rates rising from 12.2% in 2021 to 15.1% in 2023. Most Americans are now priced out of newly built homes, with existing home sales disappointing in April despite a modest decrease in mortgage rates.

Market impact: The housing market is significantly affected, with reduced demand from buyers and some sellers struggling to offload properties. Mortgage lenders are experiencing increased application denials, while homebuilders face decreased sales. First-time buyers and refinancers are particularly impacted, with some lenders offering rate cuts following a brief respite in borrowing costs.

What to watch next: In the coming months, investors should monitor the May existing home sales report (June 2023) for further insights into housing market demand. Additionally, the Federal Reserve's June meeting (June 14, 2023) will provide clarity on future monetary policy and its potential impact on mortgage rates. Lastly, keep an eye on mortgage rates offered by major lenders to gauge the extent of rate cuts and their effect on demand.