Mortgage rates jumped above 4% for the first time this year, potentially dampening the rebound in the homebuilder sector and related exchange traded funds.
Year-to-date, the SPDR S&P Homebuilders ETF (NYSEArca: XHB) rose 6.8% and iShares U.S. Home Construction ETF (NYSEArca: ITB) gained 3.6%.
The average rate on a 30-year, fixed-rate mortgage debt security rose to 4.04% from 3.87% for the week ended Thursday, reports Joe Light for the Wall Street Journal.
Bond yields have been inched higher over the past few weeks after yields on benchmark 10-year Treasury notes rose over 50 basis points to 2.38% since the mid-April low. Fueling the recent rise in yields, a number of positive economic data, such as the improved jobs openings reported earlier this week, added to speculation that the Federal Reserve could hike short-term interest rates later this year for the first time since 2006.
The recent jump in mortgage rates was the quickest since 2013, mirroring the one-week advance in May 2013 when the Fed hinted at terminating its bond-purchasing program.
Some market observers are worried that the rising mortgage rates could dissuade borrowers to move into new homes.
“Most people feel that rates are going back up to 5% or higher,” Guy Cecala, publisher of Inside Mortgage Finance, said in the WSJ article. “It’s a question of how fast.”