Home Buyers’ Nightmare – Effects of Interest Rate Hike
With interest rates at their highest levels since 2008, homeowners with low mortgage rates have seemingly opted out of selling their homes, which can punish the housing market until rates subside.
Current homeowners are deterred from borrowing money at such high rates for newer homes; this will, in turn, affect those looking to buy homes as the supply of houses on sale may be lower in the coming months. Redfin Corp. recently announced that the number of newly available homes decreased 19% year-over-year in the four weeks leading up to September 11th. Economists project that a low supply of homes may increase house prices, even with these prices being already high; just in June, housing affordability had been at record lows last seen since 1989.
To further add flame to the fire, mortgage data firm Black Knight Inc. released that 90% of first-lien mortgages had an interest rate below 5%, and more than 65% were below a rate of 4%. Last week, the average 30-year fixed-rate mortgage was 6.02%, creating a complete lack of incentive for Americans to sell their old homes just to be locked into paying more money at higher fixed rates. With home prices and interest rates up, there seems to be a housing climate where home sellers refuse to sell and home buyers refuse to pay.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
