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After months of relentless interest rate hikes and dwindling volumes, the U.S. mortgage market is finally glimpsing light at the end of a long tunnel.
Recent data from the Mortgage Bankers Association (MBA) indicates a significant drop in mortgage rates, hinting at improved affordability and a potential revival in the housing market.
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Mortgage data released last week by Freddie Mac also unveiled a decline in the 30-year average rate below 7%. According to Sam Khater, Freddie Mac's chief economist, “given inflation continues to decelerate and the Federal Reserve Board's current expectations that they will lower the federal funds target rate next year, we likely will see a gradual thawing of the housing market in the new year."
Lately, stocks in the real estate sector have experienced an impressive surge, with the Real Estate Select Sector SPDR Fund (NYSE:XLRE) climbing 24% since late October. Particularly noteworthy within this sector is the performance of companies heavily influenced by residential mortgage rates. This segment, represented by the iShares Mortgage Real Estate ETF (NYSE:REM), has experienced a 30% increase in the same timeframe.
Standout performers in this sector include Arbor Realty Trust Inc. (NYSE:ABR) and Claros Mortgage Trust Inc. (NYSE:CMTG), which have seen their stock prices soar by 29% and 39%, respectively.
Chart: REM vs XLRE 2-Month Performance
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