On August 15, I wrote here that the odds of mortgage rates falling over the next several months were probably not as good as their going up. On that day, the 10-year U.S. Treasury note closed at 4.22% and I wrote that it might well rise to 4.75% or 5.00% with no input from the Fed. Well, I got lucky. That’s exactly what’s happened.
Now I’d like to try to tie together what’s happening in the bond markets to what’s happening in Santa Fe’s real estate markets. With the 10-year now having closed Wednesday at 4.72%, the average 30-year mortgage now lies around 7.83%, according to Bankrate.com. Without the Fed having done anything, mortgage rates are markedly higher than they were two months ago — all because of a monster bond market selloff.
Now let’s look at a couple of metrics from the Santa Fe housing markets. The Santa Fe Association of Realtors just released a report on sales volumes and prices for the third quarter of 2023. For Santa Fe County, the number of transactions versus the year-ago quarter was down 11.6%. But the median price versus the year-ago quarter was up 9.2%.
Why? As I wrote here, homeowners who have existing mortgages of 4% or below aren’t exactly inclined to hop into a mortgage at 7.83% so they can move and get a bigger bathroom. This has dramatically limited supply of existing homes. Especially around the median sales price, where most buyers take out mortgages, I might expect there to be tighter supply in Santa Fe and for prices to continue to climb, though not to skyrocket. It’d be a reasonable interpretation of the data.
For the moment, this is good news. And anecdotally, we have seen that there is proportionally greater supply in the top end of the market, and that it hasn’t been whipsawed as much by bond markets. That’s a good thing. That market is functioning quite normally.
Today’s higher 10-year Treasury yields have a direct effect in limiting housing supply and supporting prices. Hasn’t always worked that way! So, if you want a peek into what may happen in Santa Fe housing markets, look at this table fairly often.
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