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Mortgage rates surge as home affordability nears record worst

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A “for sale” sign outside a house in Louisville, Kentucky.

Luke Charlett | Bloomberg | Getty Images

Mortgage rates have just reached their highest levels since 2009, and home prices continue to rise by double digits. Almost all of the major US housing markets are now more affordable than ever, and affordability is approaching the worst point on record.

According to new calculations by mortgage technology and data provider Black Knight, 95% of the 100 largest US home markets are not more affordable than long-term levels. That number was 6% at the start of the pandemic. The 37 markets are more affordable than ever.

House prices rose slightly in March, but nevertheless 19.9% ​​increase from the previous year.. Compared to February, prices have risen 2.3%. This is the fifth time since the pandemic began, and home prices have risen by more than 2% in a month. Prices have risen 5.9% in the first three months of this year. Consumers are working to raise prices across categories, From real estate to airfare and groceries..

According to Mortgage News Daily, the popular 30-year average interest rate started at 3.29% this year and reached 5.55% on Monday. Interest rates could rise even higher as markets gain more commentary on the Fed’s move to curb inflation after the Fed’s meeting on Wednesday.

Affordable home purchases haven’t been so bad since July 2006, when interest rates were around 6.75%. Second, it took about 34% of the median income to cover monthly mortgage payments, including the principal and interest on homes purchased with a 20% down payment.

As of April 21, the ratio of payments to income had reached 32.5%. Historically, rates above 21% have cooled the housing market, except for the past two years. The pandemic has brought an anomaly to the housing market due to very high demand and very low supply.

According to Black Knight, if interest rates rise by just 50 basis points or home prices rise by just 5%, affordability for homes will be the worst on record. (Of these two factors, the price is likely to rise by 5%.)

In the home market, it is often said that consumers buy monthly payments rather than buying home prices. That payment has risen by $ 552 (up 38%) to $ 1,809 and a new high of $ 790 (or 72%) since the outbreak of the pandemic.

Consumers suddenly respond to lower affordable prices Floating rate mortgage, Offers lower interest rates. According to Black Knight, ARM share of rate locks from potential homebuyers jumped from 2.5% in December to almost 8% in March. As of last week, its share was over 9%, according to the Mortgage Bankers Association.

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