Mortgage rates in the United States have been on the rise again after a six-week decline, adding to the difficulties faced by those looking to purchase a home.
The current market presents a number of challenges for potential homebuyers, including higher home prices and a shortage of available properties.
Rise in Mortgage Rates Creates Additional Challenges for Homebuyers
After a period of decline, the average long-term mortgage rate in the United States has once again risen, causing additional difficulties for those looking to enter the housing market.
On Thursday, Freddie Mac reported that the average rate for a 30-year mortgage rose to 6.42%, up from 6.27% the previous week.
This marks a significant increase from the past year’s average of 3.11%, demonstrating the challenges currently facing potential homebuyers in the face of high prices and limited options.
Mortgage rates rose this week — their first increase after falling for six consecutive weeks — capping a rollercoaster year for homebuyers that saw rates more than double in less than 12 months. https://t.co/rVSQcpGeIE
— CNN (@CNN) December 29, 2022
Mortgage rates have soared to 7.08% in recent months, a significant increase that has had a major impact on the housing market.
In an attempt to regulate inflation and maintain economic stability, the Federal Reserve has steadily increased its key lending rate throughout the year, resulting in the current increase in mortgage rates.
As a result, sales of existing homes have declined for the past ten months, reaching their lowest point in over a decade.
These rising rates have significantly impacted the housing market, making it more difficult for potential buyers to secure financing and purchase a home.
Housing Market Challenges Persist With High Home Prices and Increasing Mortgage Rates
While home prices have begun to fall due to a decrease in demand, they remain nearly 11% higher than they were just a year ago.
This, combined with the doubling of mortgage rates, made the prospect of home ownership less affordable and more intimidating for many individuals.
According to calculations by George Ratiu, a senior economist at realtor.com, the monthly payment for a median-priced home is now roughly $2,100, not including taxes and insurance. This represents a significant increase of over 60% from the previous year.
The median price refers to the point at which half of all homes sold fall below and half fall above. In addition to this, sales of new homes have also decreased.
Ratiu predicts that mortgage rates will remain above 6% in the coming year and that sales will continue to be low as a result.
VACANT Rentals are piling up on the US Housing Market.😬
Like this one in Las Vegas.
📉10% Rent Cut. No takers. Been sitting empty for 4 Months. pic.twitter.com/vCzyDWex1R
— Nick Gerli (@nickgerli1) December 26, 2022
Likewise, Ratiu added that the current market conditions indicate a significant reset, which aligns with the Federal Reserve’s goals.
This year, the Federal Reserve also increased its benchmark interest rate on seven occasions, bringing it to a range of 4.25% to 4.5%, the highest it has been in approximately 15 years.
There is also the possibility that the Federal Reserve will increase rates by another three-quarters of a point in the coming year.