Direxion Daily Real Estate Bear 3x (DRV)

[tw0122]

This softening is by design. The Federal Reserve is done watching inflation run away, and has made it a priority to cool down one of its biggest drivers: the housing market. To do so, over the past few months, the Fed has put upward pressure on mortgage rates. In December, the average 30-year fixed mortgage rate sat at 3.11%. As of last week, that rate is up to 5.27%—its highest level since 2009.

As mortgage rates rise, of course, it puts downward pressure on the housing market. If someone took out a $500,000 mortgage at a 3.11% fixed rate, that borrower would owe a monthly principal and interest payment of $2,138 on a 30-year loan. However, at a 5.27% rate, that payment would jump to $2,767. Not only are those higher rates pricing out some would-be homebuyers, but it also means some borrowers—who must meet lenders' strict debt-to-income ratios—have lost their mortgage eligibility.