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  • Mortgage rates have just hit 5%. Buying a house just got a whole lot more expensive: NPR

Mortgage rates have just hit 5%. Buying a house just got a whole lot more expensive: NPR

By on April 8, 2022 0

Mortgage rates on 30-year fixed-rate loans topped 5% this week. This increases the cost of buying a home and makes home ownership unaffordable for more people.

Steven Senne/AP


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Steven Senne/AP


Mortgage rates on 30-year fixed-rate loans topped 5% this week. This increases the cost of buying a home and makes home ownership unaffordable for more people.

Steven Senne/AP

Here’s a not-so-fun fact: The monthly mortgage payment it takes to buy a typical home in the United States is now up 55% from the start of last year. This is due to the dramatic rise in mortgage rates in recent weeks, in addition to rising prices in the booming real estate market.

“It’s pretty crazy,” says Nick Cacciatore, who is looking to buy a home in Tampa, Florida. “It’s very demoralizing.”

Back when Cacciatore was looking last summer, mortgage rates were below 3%. This week, they have risen to more than 5%. While that may not seem like much, it makes a huge difference when buying something as expensive as a house. And Cacciatore was looking for homes in the $600,000 price range.

“It added about $700 a month in monthly payments,” he says. “I mean, a ridiculous amount just from interest rates.”

Cacciatore is a lawyer starting a family practice. Her fiancé is a veterinarian. So they have good jobs and savings.

But in this overheated housing market, they continued to outbid each other. Now, with higher mortgage rates, they are looking at smaller, cheaper condos.

Some first-time buyers give up completely.

“It pretty much took them out of the market,” says Gabriela Raimander, a real estate agent in St. Petersburg, Florida. She says she was talking to a client the other day. “She told me with teary eyes,” Raimander says, “I just can’t compete in this market. My dream of owning a house will have to be postponed or given up altogether.” “

Gabriela Raimander, a real estate agent in St. Petersburg, Florida, says most first-time home buyers she works with give up. The combined impact of rising prices and mortgage rates is making home ownership unaffordable for many.

Gabriela Raimander


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Gabriela Raimander


Gabriela Raimander, a real estate agent in St. Petersburg, Florida, says most first-time home buyers she works with give up. The combined impact of rising prices and mortgage rates is making home ownership unaffordable for many.

Gabriela Raimander

Here’s what the numbers look like for a typical home in the United States: The median price of a home has fallen from $309,200 in December 2020 to $357,300.

Over the same period, interest rates rose from 2.67% to 5.08% this week. With a 10% down payment, this increased the monthly payment from $1,124 to $1,742 — a whopping 55% increase, most of which comes from rising mortgage rates.

Online searches for “homes for sale” are down

The price shock is already having an effect on homebuyers.

Already, online searches for homes for sale are down 10% year over year, according to Daryl Fairweather, chief economist at real estate brokerage Redfin. The number of people visiting the houses has also gone down a bit.

“So we’re seeing very early signs that buyers are reacting to these higher mortgage rates,” Fairweather said.

Rising mortgage rates could finally cool the simmering real estate market

Maybe that’s not a bad thing. Finally, the overheated housing market could cool, ending the frantic buying and bidding wars.

A slowdown in demand could give homebuilders time to catch up. The record low level of housing supply is one of the main reasons prices have risen so much during the COVID-19 pandemic.

“I think house price appreciation will come down significantly,” Fairweather says. “We’re going to have a year of fairly stable house price gains in real terms.”

This is, of course, exactly what the Federal Reserve is trying to do for the economy as a whole by raising interest rates. The Fed wants to curb rising prices and inflation by making borrowing more expensive.

Still, it’s unclear how much mortgage rates will rise. Unlike credit card rates or other types of loans, mortgage rates move early and dramatically in anticipation of what the market expects, for example, the Federal Reserve to do with rates and its bond purchases. over the next year. Thus, mortgage lending could plateau around this point, or it could continue to rise.

In the Seattle area, Alex Bacon is not waiting to find out.

“We’re really, really excited to move,” she says. Bacon and her husband are about to sell their tiny starter home, which they bought about five years ago. It was all they could afford, and it’s directly under the Seattle airport flight path.

Alex Bacon and her husband, Eli Leslie, in their current home, very close to the Seattle airport. “I’m right at the end of one of the runways, so the air just smells like jet fuel,” she says. The couple scramble to find a home to buy before mortgage rates rise much higher.

Alexander Bacon


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Alexander Bacon


Alex Bacon and her husband, Eli Leslie, in their current home, very close to the Seattle airport. “I’m right at the end of one of the runways, so the air just smells like jet fuel,” she says. The couple scramble to find a home to buy before mortgage rates rise much higher.

Alexander Bacon

“I’m right at the end of one of the runways, so the air just smells like jet fuel,” she says. “I can’t invite people over for a barbecue because every time you have a conversation you have to pause for 30 seconds in the middle of your thought,” she says, as a 747 roars above her garden.

After the pandemic, Bacon realized she could work remotely. She is a project manager in a medical technology company. So the couple’s plan was to move two hours north to a smaller, more affordable town and buy a bigger house that isn’t next to an airport.

But with rising rates, they are in a hurry. They prepare boxes and move as soon as they can buy this house.

The couple want to sell the current house and move two hours north, near the border with Canada. The plan is to work remotely and be able to afford a bigger house that is not near an airport and has space for home offices.

Alexander Bacon


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Alexander Bacon


The couple want to sell the current house and move two hours north, near the border with Canada. The plan is to work remotely and be able to afford a bigger house that is not near an airport and has space for home offices.

Alexander Bacon

“We’re starting to see rates around 5%, and I’m so afraid that if they go up too much, we won’t be able to afford the house we want up there,” she says.

Their current home has gone up in value a lot in recent years, even with the planes.

This would be the case for anyone who already owns a home. They are in a much better position than a first-time home buyer because when they sell their home they will likely have a nice amount of money for a down payment on a new place.