Mortgage Rates: When Will They Finally Drop?

Mortgage rates are showing little sign of a significant decrease in the near future, impacting the U.S. housing market. Current indicators, such as long-term U.S. Treasury yields and inflation-protected securities, suggest that rates will remain elevated, making it difficult for aspiring homeowners to achieve their goals.

The current high-rate environment has created a "locked-in" effect, with a large percentage of existing mortgage holders enjoying rates below 6%. This disincentivizes them from selling their homes, as they would likely face higher rates on a new purchase. This limited inventory, coupled with rising home prices, is a major factor in the declining housing affordability.

Experts estimate a substantial shortage of housing units in the U.S., exacerbating affordability issues. While housing starts are increasing, the pace is slower than anticipated, and a return to lower mortgage rates is not expected soon. This complex situation particularly affects first-time buyers struggling to enter the market.