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U.S. mortgage rates surge to highest level in 20 years



The average mortgage rate has surged to 7.09%, a level not seen in over 20 years.

The latest data, released on Thursday by mortgage giant Freddie Mac, underlines the escalating borrowing costs that have thrown a wrench in the gears of the housing sector.

This uptick marks a pivotal juncture as the rate for a 30-year, fixed-rate mortgage climbs above 7% for the first time since the prior autumn, juxtaposing with rates hovering around 5% merely a year ago.

The Federal Reserve’s deliberate push towards higher rates has profoundly impacted the housing realm. As borrowing and purchasing activity slackened due to elevated costs, the housing market has witnessed a palpable slowdown.

This sluggishness has had far-reaching repercussions, leading to substantial layoffs within the mortgage industry and placing strain on overall economic growth.

While not directly linked to the central bank’s maneuvers, mortgage rates exhibit a loose correlation with the trajectory of the 10-year Treasury yield. Thursday’s data reveals that the 10-year yield reached its highest point since 2007. Analysts argue that this may herald further yield hikes, as markets brace themselves for the possibility that rates will remain elevated.

As a consequence, stock markets experienced a decline on Thursday, extending a downward trend observed throughout August, with investor concerns rekindled about continuous Fed rate increases. The minutes from recent Fed meetings reveal that officials maintain their view of inflation risks and the potential necessity for heightened interest rates.

Rising costs

The initial anticipation was that the rising cost of borrowing to secure homes would be transient when the Federal Reserve embarked on a series of interest rate hikes last year.

However, the trajectory has proved otherwise, as rates are now resuming their ascent towards earlier peaks. This resurgence is notwithstanding a brief dip towards 6% in late 2022 and early 2023. Consequently, various stakeholders in the real estate market, from buyers and sellers to investors, are acclimating to the reality of enduring elevated rates.

Prospective buyers find themselves grappling with affordability challenges, as limited options within their budget range hinder their ability to enter the market. Conversely, potential sellers are often hesitant to list their homes due to the reluctance to relinquish low-rate mortgages for more expensive loan options.

Homeowners who recently secured high-rate mortgages with the expectation of swift refinancing are now forced to reconcile with an extended wait. This climate has prompted some potential buyers to delay their plans and continue renting, perpetuating the cycle of high demand and limited supply, which consequently exerts upward pressure on prices.

Existing homes

The median price of existing homes, according to the National Association of Realtors, stood at over $410,000 in June. Though slightly below the previous year’s peak, this figure still ranks as the second-highest ever recorded.

In response to the current state of affairs, Arnell Brady II, a senior loan officer at Bay Equity Home Loans, remarked, “Across the board, most consumers are on the sidelines… They are waiting for the market to improve before they jump back in.”

In the backdrop of historic lows during the pandemic, with rates plummeting below 3%, a wave of buying surged across the United States, driving prices upward, particularly in regions such as Phoenix and Las Vegas.

However, with rates now surging and many workers returning to their physical workplaces, previously hot real estate markets are witnessing a cooling trend. Median home prices in Austin, Texas, and San Francisco have notably declined, according to data from the National Association of Realtors.

Mortgage rates’ palpable impact cannot be underestimated. A comparison between a 4% mortgage rate and a 7% mortgage rate, for instance, illustrates the stark difference in the overall interest paid over a 30-year loan period.

The housing market’s dynamics have shifted notably due to individuals like Stephen Williams, who opted not to sell their homes, contributing to a decline in national transactions. Sales of existing homes, the backbone of the housing market, have dropped by 19% compared to the previous year.

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Tech giants drive global mega-cap surge amid inflation relief



Tech giants have taken the lead in propelling global mega-cap stocks to new heights.

This surge comes as a welcome relief for investors who have been closely monitoring the impact of rising inflation on the financial markets.

The tech sector, including giants like Apple, Amazon, and Microsoft, has been instrumental in driving the rally. These companies have reported robust earnings and strong growth prospects, which has boosted investor confidence. As a result, the market capitalization of these tech behemoths has reached unprecedented levels, contributing significantly to the overall rise in global mega-cap stocks.

The easing of inflationary pressures has played a pivotal role in this resurgence. Central banks’ efforts to tame inflation through monetary policy adjustments have begun to bear fruit, reassuring investors and stabilizing financial markets. As concerns over rapidly increasing prices recede, investors have become more willing to invest in mega-cap stocks, particularly in the tech sector, which has demonstrated resilience in the face of economic challenges.

Will the tech giants maintain their momentum and continue to lead the mega-cap surge, or are there potential risks on the horizon?

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Real reason bosses want employers back in the office



As the world gradually recovers from the pandemic, employers are increasingly pushing for their staff to return to the office after years of remote work.

The driving force behind this push is the sharp decline in commercial property values, which has left many businesses concerned about their real estate investments.

Commercial property values have plunged in the wake of the pandemic, with many companies downsizing or reconsidering their office space needs.

This has put pressure on employers to reevaluate their remote work policies and encourage employees to return to the office. #featured

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Businesses cash in on Black Friday sales



Black Friday, the annual shopping frenzy, has become a global phenomenon rooted in economic strategies.

Retailers deploy various tactics to lure consumers, creating a win-win scenario for both shoppers and businesses.

The concept of Black Friday traces its roots to the United States, where it marks the beginning of the holiday shopping season. Retailers offer significant discounts on a wide range of products to attract a massive customer influx. This strategy, known as loss leader pricing, involves selling a few products at a loss to entice customers into stores, hoping they will buy other items at regular prices.

Retailers also employ the scarcity principle by advertising limited-time offers and doorbuster deals. This sense of urgency compels consumers to make quick decisions, boosting sales.

Furthermore, online shopping has revolutionized Black Friday economics. E-commerce giants use data analytics to customize deals, targeting individual preferences. Cyber Monday, the digital counterpart to Black Friday, capitalizes on the convenience of online shopping. #featured

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