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Written by Cyndie Martini
on September 03, 2019

Since peaking in October 2018, the 30-year bond has been on a slide. This month it dipped below 2.00%, breaking its low from July 2016 after the FED cut its target rate by 25 basis points. That move dropped the 30-year fixed-rate mortgage to 3.81%. With mortgage rates so low, you'd expect the housing market to be booming but that isn't the case.

For the last four years, the U.S. housing market has basically been on a plateau. Existing home sales bottomed in January of 2019 and jumped up in February but have been sliding back down since. June home sales decreased 1.7% from the previous month and 2.2% from a year earlier. The consumer is strong with wages increases, spending steady, and unemployment near a 50-year low. So why aren't people buying up homes?

The short answer is high home prices, partially the result of low home inventories. Yes - a low mortgage is nice but if the thing you are trying to buy is near its highs, that doesn't really help much. Buying at the peak of the financial crisis is all too fresh in peoples' minds. Since 2012, home prices have outpaced wages 3:1. The consumer is simply not able to keep up with ever-increasing home prices.

It isn't all doom and gloom for housing. For the week ending August 2, mortgage applications were up 5.2% from the week prior. Also, consumers are flush with mortgages. The Federal Reserve Bank of New York reported that for Q2 2019, mortgage debt hit an all-time high, beating out the 2008 peak. Mortgages are the largest component of consumer household debt. This isn't to imply there is a mortgage bubble. Compared to 2008, mortgage application standards are far more strict

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