"This Isn't a Drill" Mortgage Rates Hit Highest Level Since May 2014

A housing bust may be just around the corner. Rates have climbed to a level last seen in May of 2014.

The chart does not quite show what MND headline says but the difference is a just a few basis points. I suspect rates inched lower just after the article came out.

For the past few weeks, rates made several successive runs up to the highest levels in more than 9 months. It was really only the spring of 2017 that stood in the way of rates being the highest since early 2014. After Friday marked another "highest in 9 months" day, it would only have taken a moderate movement to break into the "3+ year" territory. The move ended up being even bigger.

From a week and a half ago, most borrowers are now looking at another eighth of a percentage point higher in rate. In total, rates are up the better part of half a point since December 15th. This marks the only time rates have risen this much without having been at long term lows in the past year. For example, late 2010, mid-2013, mid-2015, and late 2016 all saw sharper increases in rates overall, but each of those moves happened only 1-3 months after a long term rate low.

Not a Drill

So far this month, MBS have stunningly dropped over 200 bps, which easily translates into a .5% or more increase in rates. I've been shouting "lock early" for quite a while, and this is precisely why, This isn't a drill, or a momentary rate upturn. It's likely the end of a decade+ long bull bond market. LOCK EARLY. -Ted Rood, Senior Originator

Housing Bust Coming

Drill or not, if rising rates stick, they are bound to have a negative impact on home buying.

In the short term, however, rate increases may fuel the opposite reaction people expect.


Those on the fence may decide it's now or never and rush out to purchase something, anything. If that mentality sets in, there could be one final homebuilding push before the dam breaks. That's not my call. Rather, that could easily be the outcome.

Completed Homes for Sale

Speculation by home builders sitting on finished homes in 2007 is quite amazing.

What about now?

Supply of Homes in Months at Current Sales Rate

Note that spikes in home inventory coincide with recessions.

A 5.9 month supply of homes did not seem to be a problem in March of 2006. In retrospect, it was the start of an enormous problem.

In absolute terms, builders are nowhere close to the problem situation of 2007. Indeed, it appears that builders learned a lesson.

Nonetheless, pain is on the horizon if rates keep rising.

Price Cutting Coming Up?

If builders cut prices to get rid of inventory, everyone who bought in the past few years is likely to quickly go underwater.

Mike "Mish" Shedlock

No. 1-18

About 3.5 years ago when rates were about what they were now, I bought a condo for 100k, now my units are selling for 135k. I would really appreciate some kind of rate increase to keep rates up, I'm tired of the over valuations on my property taxes, it's as if the condo owners association has caught on as well, raising condo dues every .. single .. year. Sadly.. My wages can't keep up, the only upside is I got smart and moved close to work. I can bike/walk to work, and even a grocery store is a mile away now, but the risk of getting run over by driver texters is not decreasing.


"If builders cut prices to get rid of inventory, everyone who bought in the past few years is likely to quickly go underwater." Perhaps the biggest IF of all time. Won't happen in SoCal no matter what.


I believe you represent a very large, hard to measure suppressed appetite for housing. If prices increase disinflate or even stay flat the demand will still be there as many people have been unwilling trapped on the side line. Any meaningful price drop (a huge if) will be met with a demand that can't be quenched and protect any type of real bubble burst. Just a theory, not touting it as fact.


It does not have to be the same bubble bursting twice, there is another bubble forming in real estate that will burst. Easy cheap money is chasing properties everywhere. How long do you believe that will keep going? It cannot last as the money will run out.


Historically mortgages rates are still very low. I have a hard time believing another 100-200 bps increase in the current coupon would be what derails housing. I have to think the amount of household debt, economic growth and housing formation are far more important factors.