9/28/2022: 30 Year Fixed Mortgage Rates Hit 7%
30-year rates increased 3.94 percentage points in a year
Real estate markets continue to be under pressure as mortgage rates skyrocket. 30-year fixed rates rose to over 7% yesterday before coming back down to 6.65%. Overall, the mortgage rate has risen more than 3.5 percentage points in the past year. If you have a $300K mortgage, your monthly payment will go from $1,265 at 3% to $1,896 at 6.5%, a 50% increase!!!
I believe there is actually a lot of natural demand from first-time home buyers due to the current US demographic. But a lot of buyers were priced out of the real estate market due to the big price increase during the pandemic. Home prices for hot markets like Austin, Vegas and Boise rose around 50% during the pandemic. But now with the high mortgage rates, the prices are finally coming down. I feel there’s a lot of unnecessary pain and adjustment that could have been avoided if the Fed had started raising rates last year. Real estate prices shouldn’t have gone up so much. It will cause a lot of pain if the real estate prices crash as it’s a very leveraged asset. But if it doesn’t go down, very few people could afford to buy houses. The current situation forces people to stay at their homes much longer because moving will reset their mortgage payments a lot higher due to higher rates. We are going to see a lot less economic activity in the housing sector and first-time home buyers are kind of screwed. They are facing high prices, high rates and low inventories. I do hope there is an easy way out but the best case scenario might be the house prices stagnate while the wages keep going up and the Fed eventually starts cutting interest rates to make real estate affordable again.