The 30-year mortgage rate has reached 5%, rendering homeownership more expensive for American families.
According to government-backed mortgage company Freddie Mac, 30-year fixed-rate mortgages rose 0.28% in a single week and nearly 2% since this time last year.
“As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation,” the company’s website explained.
Realtor.com economist George Ratiu told The Wall Street Journal that, as of one year ago, purchasing the median American home at prevailing rates implied a monthly mortgage bill of about $1,223 after a 20% down payment. Today, the same purchase would imply a monthly payment of nearly $1,700—a 38% increase, he estimated.
“Most Americans who buy a home are in a sense making the biggest purchase of their lives,” Ratiu added, noting that the additional barrier to home ownership will harm American families.
Last week, CNBC real estate correspondent Diana Olick wrote that total mortgage application volume is quickly plummeting — down 41% from one year ago. “Rising interest rates are crushing the mortgage market,” she explained, “as precious few homeowners can now benefit from a refinance and more potential homebuyers become priced out.”
“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” economist Joel Kan told CNBC. “As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019.”
As The Daily Wire’s Cabot Phillips explained on a recent episode of “Morning Wire,” the Federal Reserve is now warning of a housing bubble. The central bank recently made its first move to raise interest rates, thereby increasing the cost of borrowing money and making loans more expensive.
When asked why housing costs are spiking, Phillips pointed to inflation — which is currently at an 8% year-to-year rate — rising costs for lumber and fuel and the continued fallout from COVID-19.
“During the pandemic, new construction projects were halted across the board, and that means the number of houses now up for sale is far lower than usual. It’s simple supply and demand,” he explained. “And unfortunately on that front, it will likely take years for new home construction to once again meet demand.”
“Some real estate experts say that increasing mortgage rates should cool the market a bit,” Phillips commented. “Remember, mortgage rates were down around 2% during the pandemic, so a lot of people were simply able to afford houses that a few years earlier, when rates were higher, would’ve been out of their price range.”
Some experts believe that “until the supply of houses meets the overwhelming demand that we’re seeing right now, prices will continue to rise,” Phillips remarked.