FinancingMarket Direction

Market direction unclear as statistics suggest opposing trends

The end of February, interest rates were at a four-year high, with 30-year fixed rate mortgages averaging 4.40% and 5-year adjustable rate mortgages averaging 3.65%. At the same time, interest on treasury notes is down. This means investors are abandoning bonds and now buying mortgages. Despite changing their methods, investors don’t have any concerns about the market, which they say still features low supply and high demand.

While supply and demand may currently be low and high respectively, this analysis doesn’t account for which direction those are moving. In fact, supply is going up and demand is going down, as prospective buyers can’t afford to purchase higher-end homes as a result of the higher mortgage rates. Investors purchasing mortgages may see high mortgage rates as a sign of an improving market, but buyers don’t.

The market overall is currently wavering near the line between a buyer’s and seller’s market, so it’s hard to guess which direction it will go next. We should be able to get a better idea of the market direction at the end of March, signalling the end of the first quarter.

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