This week, the American dream of homeownership moved further out of reach for prospective home buyers as mortgage rates in the United States inched closer to 8%, a level not witnessed in 23 years. According to data from Freddie Mac, the average rate on the 30-year fixed mortgage climbed to 7.63% from the previous week’s 7.57%. This marks the tenth consecutive week that mortgage rates have remained above the 7% threshold, a challenging streak reminiscent of the late 2000s.
The Federal Reserve shoulders a significant portion of the blame for this grim scenario, as they have chosen to maintain the benchmark interest rate at higher levels for an extended period. Consequently, mortgage rates have remained elevated, making it increasingly challenging for both buyers and sellers to navigate the housing market. Buyers are finding it difficult to afford properties, while sellers are compelled to retain their assets when they wish to offload them.
Lawrence Yun, the Chief Economist of the National Association of Realtors, underscored the magnitude of the crisis in a recent interview, revealing that “the affordability, the monthly payment to buy a medium-priced home, by a middle-income person has essentially doubled from pre-COVID to today.” This exorbitant increase in monthly payments has exacerbated the dilemma of surging demand coupled with dwindling housing inventory, resulting in even higher mortgage rates.
In a disheartening turn of events, last week saw the number of purchase applications plummet by 6% compared to the prior week, according to the Mortgage Bankers Association, with a staggering 21% drop in volume compared to the same period last year. As a potential means to alleviate the situation, some buyers are considering adjustable-rate mortgages, with the five-year ARM offering a slightly more enticing rate at 6.52%.
Chief Economist Lawrence Yun lamented, “This is taking away the American Dream, the dream of ownership opportunity,” as existing home sales experienced a 2% decline in September, despite the diminishing housing inventory. It is becoming increasingly evident that soaring mortgage rates are smothering housing activity.
Despite the formidable challenges, prospective home buyers are encouraged to remain patient and deliberate in their homebuying endeavors. While owning a home may seem elusive, with the right strategy and unwavering dedication, the dream of homeownership can remain within reach.
In the current economic climate, the prospect of mortgage rates reaching 8% appears to be a formidable barrier on the path to homeownership for many Americans. The future of the housing market remains uncertain as the Federal Reserve’s decisions continue to impact mortgage rates, leaving many prospective homeowners hoping for a reprieve in the near future.
Source: Yahoo Finance
