In a disheartening turn of events for prospective homeowners, mortgage rates in the United States have inched closer to 8%, reaching a level not witnessed in 23 years. According to data from Freddie Mac, the average rate for a 30-year fixed mortgage climbed to 7.63%, up from 7.57% the preceding week. This marks the tenth consecutive week that rates have surpassed the 7% threshold, a streak unseen since the final months of 2000.
The Federal Reserve shoulders much of the responsibility for the current predicament, electing to keep the benchmark rate elevated for an extended period. Consequently, rates have remained stubbornly high, creating a challenging environment for both buyers and sellers. Prospective buyers now find themselves unable to afford properties, while sellers grapple with the dilemma of retaining assets they aim to offload.
Lawrence Yun, Chief Economist of the National Association of Realtors, highlighted the gravity of the situation, stating 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 exacerbates the already critical issue of surging demand colliding with diminishing inventory, resulting in further rate escalations.
Recent data from the Mortgage Bankers Association underscores the magnitude of the challenge. Purchase applications dwindled by 6% compared to the prior week, while volume plummeted by 21% compared to the same period last year. The shift towards adjustable-rate mortgages appears to be a manifestation of the desperation to lower rates, with the five-year ARM presenting a more palatable option at 6.52%.
Lawrence Yun, echoing the sentiments of many in the industry, lamented, “This is taking away the American Dream, the dream of ownership opportunity.” The struggle is evident in the September figures for existing home sales, which dipped by 2% despite the dwindling inventory. It is increasingly apparent that the weight of mortgage rates is smothering housing activity.
With mortgage rates inching towards 8%, the road to homeownership in the United States faces unprecedented challenges, leaving prospective buyers grappling with soaring costs and limited options. Though it may require time and concerted effort, the dream of owning a home remains attainable with the right strategy in place.
Source: Yahoo finance
