"Mortgage News Daily Index" announced the 30-year fixed mortgage interest rate on October 7, which has soared to 7.12%. Compared with the 2.65% at that time in January last year, the mortgage interest rate has increased by 4 percentage points, or 2.5 times.
Finance Magazine quoted the US-wide housing price index produced by Zillow in September and found that from May to August 2022, in just four months, the hot California , Colorado , Texas Austin and other regions have all experienced a drop of more than 10%. Zillow counts 117 of the 896 cities and regions in the United States, and 117 of them have shown a monthly decline. Austin, Texas, which is recognized as a "bubble city", Boise, Idaho's capital, Las Vegas , Phoenix , etc., all fell, while high-priced areas such as San Francisco , fell 7.8% in a single month, and San Jose fell 10.6%, which also shows that the plummeting price of technology stocks has triggered a decline in real estate prices.
Real estate prices fell a global phenomenon. Other countries such as Australia, New Zealand , Canada, etc., have risen more than most cities in the United States in the past few years, and are now the first to fall. Goldman Sachs Securities proposed a global real estate market forecast report in early September, directly calling out New Zealand's national housing prices will fall by 21% by the end of 2023, Australia will fall by 18%, and Canada will fall by 13% from the current level, which means that the annual decline in some regions will approach 30%.
Last Friday (October 7), the U.S. Department of Labor announced that the number of new non-agricultural jobs in September was 263,000, and the unemployment rate in September was 3.5%, down 0.2 percentage points from last month. The number of new non-agricultural jobs is also more than 10,000 more than the market expected 250,000.
Whether the fully employed labor market can cool down is certainly an important indicator to predict when inflation will be suppressed. Although the increase in unemployment is a tragedy, it can suppress the increase in wages and thus alleviate the pressure of rising prices. However, the wealth effect is also an important tool for the FRC to try to control inflation. Stock and real estate prices soaring during the COVID-19 pandemic are the powder depots that trigger U.S. inflation. FRC will use violent interest rate hikes to suppress the stock and housing markets, and the results will be faster and more effective than labor employment.
Compared with the labor market, asset prices are more sensitive to interest rates, squeezing bubbles faster, and the effect of wealth tightening is more significant. The ETF of the U.S. real estate construction company fell by 34%, close to NASDAQ (down 32% to last Friday), surpassing the S&P 500 (down 23.64% to last Friday), and the mortgage interest rate that has soared to 7% is rapidly guiding housing prices to fall. If the decline predicted by Goldman Sachs Securities is worth referring to, then we can expect the overall U.S. housing market to fall by 15% to 20%. The cooling effect of the rapid rate hike of FCC on the US real estate market will definitely far exceed that of the labor market.
