The housing market is in trouble once again as mortgage rates reach their highest level in two months. According to industry experts, the average rate on a 30-year loan rose to a staggering 6.94% this week, the highest it has been since December.
This sharp increase in rates has many industry professionals on edge as the spring home-buying season approaches. Potential buyers are already being turned off by these higher rates, leading to a slowdown in demand for homes. This could spell disaster for the traditionally busy season for home buyers.
Sam Khater, chief economist at Freddie Mac, warns that the recent rise in rates has “dampened already tentative homebuyer momentum.” This could have serious implications for the housing market, which has already been struggling with limited inventory and sky-high prices.
The Federal Reserve’s aggressive tightening campaign is largely to blame for this latest spike in mortgage rates. In an attempt to control inflation and slow the economy, policymakers have raised the benchmark federal funds rate 11 times over the past 16 meetings. And while they have indicated they are done raising rates, they are not yet ready to start cutting them.
The American dream is currently unavailable in Bidens America. Young people can’t participate while holding the anchor of inflation and high mortgage rates, plus the drop in real wages. pic.twitter.com/8BBqSDXxJE
— Jericho (@JerichoXVI) February 27, 2024
This means that homebuyers can expect to continue facing high rates and limited inventory for the foreseeable future. A recent study by LendingTree found that even a minor change in rates can have a major impact on the cost of a monthly mortgage. In fact, the study projected that rates jumping from 3.79% to 5.25% could add up to $75,000 over the lifetime of a 30-year loan.
This isn’t just bad news for buyers, it also spells trouble for sellers. With rates staying stubbornly high, many homeowners who locked in low rates before the pandemic are hesitant to sell their homes and become buyers themselves. This has led to a significant decrease in available home supply, down 34.3% from pre-pandemic levels.
Under Donald Trump Mortgage Rates dropped -32%
Under Joe Biden, Mortgage Rates have increased +140%.
Under Trump savings rates went up +129%
Under Biden savings rates went down -71%#BidenomicsSucks
— Sandy 🇺🇸 🇧🇻🇱🇺 (@SandyForLiberty) March 4, 2024
It seems the housing market is caught in a vicious cycle as rising rates limit demand and limited inventory drives prices even higher. And with the Fed holding off on any rate cuts for now, it looks like this trend will continue for the time being.
Only time will tell how this situation will play out, but for now, it seems like the housing market is headed for some rough waters. So, if you’re planning on buying or selling a home, buckle up and prepare for a bumpy ride.
