Buying a home has become harder for the first time in decades as both the pandemic and current interest rates have sent prices skyrocketing, hurting buyers on both sides.
Juana Summers, host:
As if homebuyers haven’t been through enough lately, today brought a painful milestone. Mortgage rates are now averaging over 7% nationwide. It’s been 20 years since interest rates were this high, and now it’s driving up prices for many people in the US who can’t afford to own a home.
NPR’s Chris Arnold talks about what’s coming next. Hello Chris.
Chris Arnold, Byline: Hey Juana.
Summers: So what impact will these rate hikes have on the housing market?
ARNOLD: Well, it hits home buyers pretty hard. And it’s not just high interest rates. I mean, people of a certain age remember when mortgage rates were 7, 8, or 9% or higher for him. But the difference this time is that the price has increased significantly. That is, in his two years during the pandemic, prices will rise he 30-40%. That is, he is one of the very high prices and the biggest mortgage rate hikes ever. That’s an increase from 3% at the beginning of the year to 7%. It’s a 4 point jump. This put the brakes on the housing market by adding about $1,000 to the monthly payment to buy a typical home. That means the number of homes for sale has been declining each month for the past eight straight months.
Summers: Wow. I know you’ve talked to a lot of homebuyers. what are they telling you?
Arnold: It’s making a lot of people rethink whether they can afford to buy a house and whether they can support a family with many children. It’s a human figure. She was a Navy diesel mechanic. Her husband is a naval officer. He is on board now. And they agreed to buy a new house, almost under construction, in Virginia.
Heather Gant: He said he didn’t sleep thinking about it last night. And he just said, we are so messed up. So I said
ARNOLD: And actually despite that, they’re now thinking about buying the place. But many buyers cannot afford it. And this also affects sellers, right? That is, if the mortgage on the current house is 3% or less of his, fewer people will want to sell their house and move. So housing is kept away from the market. So both ways just slow things down.
Summers: So, OK, prices have gone up quite a bit and mortgage rates are very high. Can we expect a crash in house prices?
Arnold: Falling house prices, yes. A real crash like 2007 or -8 – I mean, that’s really unlikely. And this is why, right? Similarly, during the housing bubble, millions of people had subprime mortgages with really crazy terms. I mean, remember this. I couldn’t afford it because the payment was adjusted higher. And that led to a wave of foreclosures. And we had many houses. I had too many houses. Today it’s the other way around. Housing is in short supply, but people can get fixed-rate secure home loans.
I’m Joel Kang from the Mortgage Bankers Association. He doesn’t think prices will drop significantly.
JOEL KAN: Our projection is that house price growth in 2023 and 2024 will be about flat. However, if the country’s house price growth were to plateau, we would see sharp declines in many areas.
ARNOLD: Some economists say it looks like a 5% to 10% drop, but it’s not really a crash.
Summers: Okay. You talked about homebuyers, but what about realtors who sell homes? what are they telling you?
Arnold: Yes. I double-checked with my real estate agent. We spoke with Gabriella Lymander from St. Petersburg, Florida, over the last few years.
GABRIELA RAIMANDER: Now we are seeing normalcy again. Yes, we have an open house. Some people actually do. they are looking at it The buyer will definitely have a better chance of getting the property.
ARNOLD: That’s if you can afford to pay a higher price. You may be able to bid even slightly below the asking price, which is clearly different from the last few years.
Summers: Chris Arnold from NPR. Thank you very much.
Arnold: Thank you, Juana.
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