The US 30-year fixed mortgage rate hit 7.37% this week. Analyst Logan Mohtashami said August new-home sales hit an eight-month high, while existing-home sales stayed extremely low for a fourth calendar year; builders can buy down rates, unlike the existing-home market.
Mohtashami said the pattern has recurred over the past three years and nine months: housing demand grows as mortgage rates approach 6%, then stalls when they rise above 7%. He said new-home sales have generally stayed between 570,000 and 730,000 over the past decade, excluding the COVID-era surge.
Builders’ permits and starts are at multi-year lows, Mohtashami said. If builder profits fall further, the cost of buying down rates could make housing construction more difficult, he added.
