Economic Report: Mortgage rates tumble as housing starts to drag down the economy

Street of brightly painted colonial style homes in Richmond, Va.

Rates for home loans tumbled in line with the broader bond market, even as the housing market’s woes threatened to become a headwind for the entire U.S. economy.

The 30-year fixed-rate mortgage averaged 4.53% during the Aug. 16 week, down six basis points, according to the weekly data from mortgage provider Freddie Mac. The 15-year fixed-rate mortgage averaged 4.01%, down from 4.05%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.87%, down three basis points.

Those rates don’t include fees associated with obtaining mortgage loans.

Mortgage rates follow the path of the 10-year U.S. Treasury note TMUBMUSD10Y, +0.35%  , which has tumbled over the past week as investors flocked to safe-haven assets in the wake of the Turkey currency crisis. Bond yields decline as prices rise.

Also see: Home prices rise at the fastest pace in more than four years, defying expectations of a pullback

Lower rates are a boon for borrowers and should help jump-start housing activity. But there’s been so little to buy for so long that many would-be buyers are simply giving up. And that means the sluggish housing market is no longer just a story unto itself. Analysts now believe housing will drag down overall economic growth in the near term.

In a research note out Thursday, Doug Duncan, chief economist for Fannie Mae, Freddie’s counterpart, explained: “Housing continues to drag on growth due to lackluster home-building activity, home sales, and brokers’ commissions.”

The stagnant housing market may also be impacting the labor market. The percentage of job seekers relocating for new employment was at longtime lows earlier this year, said outplacement consultancy Challenger, Gray & Christmas on Thursday. Just over 10% of job seekers relocated for work in the first six months of 2018, compared with an average of 19% over the previous decade.

The more Americans are on the move, the more local economies get a “halo effect” from home sales, according to Daren Blomquist, senior vice president at Attom Data Solutions. As Blomquist puts it, higher home sales activity “bodes well for local real-estate agents, home improvement stores, moving companies and others.”

Read: Americans can’t buy new homes, so they’re fixing up the ones they’ve got

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