There's No Place Like Home-- But Who Can Afford One?

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Mortgage Rates Climb to 20-Year High As Home Prices Keep Rising

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Mosheh, Jill, & Courtney

 

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🗞 HOME OWNERSHIP KEEPS GETTING MORE EXPENSIVE

There’s no place like home. But home ownership is getting increasingly out of reach for many Americans. This week, mortgage rates jumped to their highest level in more than two decades.

BY THE NUMBERS
The average interest rate on a 30-year, fixed-rate mortgage climbed to 7.09%, the highest level since 2002, according to mortgage giant Freddie Mac.

🏡 This makes it substantially more expensive for many people to buy a home.

  • If a house cost $350,000 today, and a buyer put 20% down, their monthly mortgage payment would be $1,880.

  • Compare that to just two years ago in 2021, when interest rates were below 3%, the monthly payment would be about $1,159, more than $700 less a month.

    • In this example, the current buyer is paying nearly $9,000 more a year than in 2021.

The chief economist at the National Association of Home Builders tells NPR— "A lot of buyers have been priced out… If you don't have access to the bank of mom and dad to get that down payment, it's very challenging."

THANKS BUT NO THANKS, JEROME POWELL
It comes as the Federal Reserve continues to raise interest rates as a way to tame sky high inflation.

And even though inflation is finally leveling off, the housing market didn’t get the memo.

  • The thinking from most economists was that as mortgage rates went up, it would force sellers to lower the price of homes.

    • That happened to some extent: They’re on average 13% lower than their peak in 2022– but still 26% higher than they were right before the pandemic in early 2020.

  • And now— despite the mortgage rates climbing– home prices are once again on the way back up.

WHERE ARE ALL THE ‘FOR SALE’ SIGNS?
There just aren’t a lot of homes on the market.

People who already are in a home don’t want to give up their current low mortgage rate for a higher one.

  • One analyst saying—- "If you're a homeowner who's got a 2% or 3% mortgage, you're not in a hurry to put your home up for sale because that would require a higher mortgage rate… So resale inventory is about half of what it should be."

And, according to the National Association of Realtors, there is a lack of inventory. There are only about a million, single-family homes on the market right now. That’s the lowest level in about 25 years. Before the pandemic there were about two million homes on the market. Here is a chart from Goldman Sachs with the 20 year trendline.

The math is simple. Less homes on the market leads to higher prices for the ones that are available. Add that to high mortgage rates and millions of Americans are priced out.

CRYSTAL BALL: WHAT’S NEXT?
Goldman Sachs was initially predicting that home prices would fall this year— but their thinking has changed. Analysts now predict that prices will continue to climb by about 2% in 2023 and even higher next year.

🔮Asked when interest rates will go back down— most analysts expect that we’re living in 6% range for another year or more. We could see the 5% range by late 2024/early 2025, but the days of 2-3% rates gone.

⏳ SPEED READ

 
 

🚨NATION

📌 The toxic aftermath of the Maui fires could last for years (WASHINGTON POST)

📌 Maui emergency chief resigns after backlash to fire response (AXIOS)

📌 Entire police department in small Minnesota town resigns, citing low pay (USA TODAY)

📌 Ron DeSantis debate memo urges him to defend Trump and take 'a sledge-hammer' to Vivek Ramaswamy (NBC NEWS)

📌 LA leaders create task force to address surge in retail flash mob robberies (CBS NEWS)

🌎 AROUND THE WORLD

📌 Canada wildfire: All 20,000 residents of northern Yellowknife evacuating (REUTERS)

📌 Judge says Florida law banning Chinese property purchases in state is legal (AP NEWS)

📌 UN: North Korea is increasing repression, leading to more starvation in population (YAHOO)


📌 A sunflower farm in England issues new plea over naked photo shoots (BBC)

📱BUSINESS & TECH

📌 Walmart and Target face similar problems — but only one is thriving (CNBC)

📌 YouTube ads may have led to online tracking of children (NY TIMES)

📌 Several brands suspend advertising on X (formerly Twitter) after their ads appear alongside Nazi content (MASHABLE)

📌 The richest Americans account for 40 percent of U.S. climate emissions (WASHINGTON POST)

🎬 SPORTS & ENTERTAINMENT

📌 U.S. women’s soccer coach resigns after team’s worst-ever World Cup showing (DEADLINE)

📌 ‘Suits’ just set a streaming record years after it ended (NPR)

📌 Britney Spears’ divorce explained (VOX)

📌 Can’t hear the dialogue in your streaming show? You’re not alone. (NY TIMES)

📌 Writers and studios meet again; CEOs to talk Friday about path to ending strike (VARIETY)

🎉 CHEERS TO THE FREAKIN WEEKEND

 
 
 
 
 
 
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