How Russia’s Invasion of Ukraine Affects the US Housing Market
Mortgage Rates on the Decline
Russia’s invasion of Ukraine is having a broad financial impact, and analysts say falling interest rates are included. Through the end of last week, the average rate on a 30-year fixed mortgage had risen by almost a full percentage point from the start of the year. After Russia invaded, things began to change.
By the time markets closed on Friday, the average rate for a 30-year fixed mortgage stood at 4.18%. Mortgage News Daily reports the number had dropped to 4.04% as of Monday, and then down to 3.9% by Tuesday. That marked the largest two day drop since March 2020 when the pandemic first started.
The Different Natures of Debt
Analysts say mortgage rates are typically linked to the yield of the 10-year Treasury, a bond issued by the government. The Russian invasion of Ukraine has decreased investors’ appetite for risk, and bonds are being bought more frequently.
When bonds are purchased, prices rise and yields fall as they move in opposite directions. The 10-year yield fell to its lowest level since January this week, highlighting its relationship to mortgage rates. What’s more, Russia’s invasion caused market uncertainty and increased the demand for short-term debt, while mortgages fall under the long-term debt category.
What It Means for Buying and Selling
Spring is a historically busy time for the buying and selling of homes. It’s not clear when the situation in Ukraine could reach a conclusion, and mortgage rates could be affected until that point. Analysts point out this will give people looking to buy a home more “purchasing power” as it pertains to the ability to afford monthly payments.
Lower mortgage rates also mean sellers can expect home prices to keep rising. Home prices are expected to jump by another 10% this year and available inventory is at historic lows. Putting it all together, the signs point to a continually tight housing market for the foreseeable future.
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