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Looking for relief from rising mortgage rates? Yahoo Finance senior housing reporter Claire Boston sits down with Brad Smith on Wealth to talk about this "little-known factor" that could help ease mortgage rates: mortgage spreads. She explains the dynamic of declining mortgage spreads and what it means for US homebuyers as they contend with condo shortages.
Read up on Claire's coverage of rising mortgage rates this week.
To watch more expert insights and analysis on the latest market action, check out more Wealth here.
This post was written by Luke Carberry Mogan.
Well, if you're a wannabe homeowner, hey, you're not alone. I'm right there in that camp with you. And you've got a list and a lot going against you. You've got high prices, limited inventory, a stubbornly high mortgage rate as well right now, but there may be hope, thanks to one little known factor that we were just discussing that could bring you some relief. Senior housing reporter, Claire Boston joins us now to learn and discuss much more. Claire, what do we need to know?
Yes. Um, so I was looking this week at mortgage spreads. And so spread is basically the extra yield on top of a treasury bond that goes in to your overall mortgage interest rates. Um, and right now, we have seen spreads, they're really wide. So you take a treasury bond, you know, call it 4.1%, and you're looking at an average of about 2.25% on top of that. Historically though, the spread is a lot lower. It's more like 1.8%. And we think that probably spreads can compress a little bit from here, just based on, you know, kind of who is buying mortgage and really the mortgages and really that market demand.
And so when it comes to new construction, what can you tell us about how builders are are looking at condos and even town homes?
Yeah, so one thing that we've seen in the marketplace too, and we're looking at affordability is, it's really hard to buy a home. And so what builders are doing is they are kind of building smaller. They are building denser. Generally speaking, the condo market is a little bit cheaper. And so for a lot of people who are really interested in buying a home, you know, condos are the way to afford that. And builders are really responding to that demand. And you know, it's not gonna completely fix affordability. We still have a huge, you know, shortage of homes in this country, but it's part of the equation.
Certainly. Now, what about single family homes? What are we seeing there?
Yeah, so with single family homes, um, you know, same thing. Builders are trying to figure out how do I make this more affordable in this time of higher interest rates. And so what we're seeing is builders are actually going smaller. Um, the average square footage of a new home has dropped by about 200 square feet in the last two years. And you know, that is very much just a story of supply and demand, you know, if overall it's more expensive, then, you know, if you make the home smaller, it gets a little cheaper. It's still really tough out there though.
Yeah. All right, Claire. Thanks so much. Uh, appreciate the breakdown here.
