Housing markets are rapidly softening as a result of inflation, stock market instability, and mortgage rates, which are currently at a 20-year high. The economy will be put to the test during the coming months, according to experts.
Rising mortgage rates, persistently high inflation, a depressed stock market, and other economic pressures are all exerting pressure on consumers, and the financial climate is only growing worse for those looking to become homes. Nadia Evangelou, senior economist and director of forecasting for the
National Association of REALTORS®, writes on the Economists' Outlook blog that people "need to earn $40,000 more in order to afford the median-priced home compared to a year earlier" with mortgage rates this week averaging 6.92%, the highest they have been since April 2002.
According to Evangelou, "the wage of the typical American has only climbed by $2,300 in the last 12 months, making circumstances much more challenging. It's a double whammy for prospective first-time home purchasers. Not just mortgage rates, either. Despite the fact that nearly half of tenants are already financially strapped, rents continue to rise. Rents rose 7.2% and consumer prices rose 8.2% in September, which is the fastest rate in forty years. More housing markets are collapsing from record highs this past spring as a result of the strain.
According to Lawrence Yun, chief economist for the NAR, the Federal Reserve's strategies to control inflation are also a concern for consumers. The Federal Reserve is unlikely to abandon its aggressive monetary policy of hiking interest rates, according to Yun, even as an economic slump approaches. "The yield on the 10-year Treasury note surpassed 4%, and in the following weeks, mortgage rates will struggle to maintain their current average of 7%. Retirement funds like IRAs and 401(k)s are rapidly disappearing.
The Fed intends to lower inflationary pressure by reducing consumer demand, but according to Yun, doing so will also help by raising supply.America needs to generate more of everything, he claims, including homes, businesses, energy-producing wells, and electric car production. "We need to provide incentives for the 3 million Americans who have not worked since the outbreak to return to the workforce."
The economy is at a fork in the road till then. According to Sam Khater, chief economist at Freddie Mac, "we continue to see a tale of two economies in the data: Strong job and wage growth is keeping consumers' balance sheets positive while lingering inflation, recession fears, and housing affordability are driving housing demand down precipitously." Without a doubt, the economy and property market will face challenges in the coming months.
- 30-year fixed-rate mortgages: increased from last week's average of 6.66% to an average of 6.92% with an average 0.8 point. 30-year rates were averaging 3.05% at same time last year.
- 15-year fixed-rate mortgages: increased from last week's average of 5.90% to an average of 6.09% with an average 1.1 point. 15-year rates were on average 2.30% a year ago.
- 5-year hybrid adjustable-rate mortgages: increased from the 5.36% average from the previous week to an average of 5.81% with an average 0.2 point. 5-year ARM averages were 2.55% a year ago.
In order to more accurately represent the total up-front cost of getting a mortgage, Freddie Mac reports commitment rates combined with average points.