- Mortgage rates have reached just 6% — more than double the rates offered by borrowers in June 2021.
- As interest rates rise, experts say fewer investors buy homes.
- Declining demand can cool the market, but in the short term no home of any kind can be affordable.
The average US fixed rate for 30-year mortgages has exceeded 6% this week.It’s more than double 2.98% The borrower was offered during the same period in 2021. Federal Reserveof Rate hikeMortgage rates Continue to rise Throughout 2022.
It’s a good news and bad news situation for the real estate market.
This rise has already affected real estate investment. According to Redfin, soaring borrowing costs and home prices have delayed real estate investors in the first quarter of 2022.
“Investor home purchases are declining for the same reason that overall home purchases are declining, due to soaring interest rates and soaring home prices,” said Sheharyar Bokhari, senior economist at Redfin. The cost of getting a mortgage and buying a home is high. ”
Investor Purchased Record $ 64 billion worth of homes in 2021 — most in at least 20 years. During the last three months of the year, it reached almost 20% of all homes purchased in the United States.
Their presence in homes helped push home prices and rents to new highs, ultimately plunging affordable homes for many potential homebuyers. As investors step back, it can help soften the real estate market.
“About three-quarters of investors’ purchases are made in cash, but they are still affected by interest rates because they often take out loans to get that cash,” Bohari said. ..
Rising mortgage rates can be good news for the housing market as they are likely to calm investor demand. However, the higher the interest rate, the lower the affordability of a home for future buyers. Slow investor and buyer demand can cool the future housing market, but this can be time consuming and now lessors and buyers need affordable housing options.
“The rise in prices has helped homeowners build fairness, but in many cases they can’t afford the next home they want,” Taylormer, Deputy Chief Economist at Redfin, said in a statement.
Higher mortgage rates are driving rental demand
As mortgage rates rise, they contribute to the deterioration of affordable mortgage prices.
According to Realtor.com, median homebuyers are now seeing monthly mortgage payments that are more than $ 400 higher than they were a year ago.
George Ratiu, Chief Economist at Realtor.com, said: “In the last four months alone, mortgage rates have exceeded 200 basis points and many homebuyers have reached budget limits, resulting in demand for new homes. It’s decreasing. ” Before Said in a statement.
As more and more prospects get priced from home purchases, they are either Return to rent Or make the renter stay longer — and it is pushing rents to historically highs.
“Rentals are high, but mortgage payments exceed the rents of many homes, making it more attractive than many Americans buying this year,” Ma said.
Data from Realtor.com show Nationally, rents have risen in almost all states compared to this time last year. According to the company, the median monthly rent in the United States reached a record high of $ 2,002 in May, up 15% from the same period in 2021.
For Americans who earn a whole country Median income At $ 67,521 a year, the average rent for a one-bedroom unit is almost 36% of pre-tax wages. This is more than the financial experts recommend for a housing budget.
Rents are reaching their limits as inflation pushes the cost of everyday goods and rents are rising rapidly. Also, with the disappearance of pandemic-related federal rent relief funds and programs, evictions of peasants are increasing nationwide.According to experts, in some cities the eviction filing rate is Reach 150-200% Average before the pandemic.
“We expect rent growth to slow in the coming months, but it’s likely to stay high, causing renters to continue to have affordable prices,” Ma said.
If you are a future home buyer or a lessor with a shared story, please contact this reporter at [email protected]