Post Pandemic Surging Mortgage Rates Are Driving Home Buyers From The Market Causing Prices To Plummet

surging mortgage rates
Homeowners are worried about surging mortgage rates

Surging mortgage rates are making an already tough U.S. real estate market for prospective buyers even tougher. They have faced double-digit price increases and cutthroat competition for listed properties. Now they are facing another challenge of rising mortgage rates.

Freddie Mac is reporting the average interest rate for mortgages jumped to 4.42% for the week ended March 24. This is a 1% jump since January 2022. The current rate is the highest homebuyers have seen since March 2019.

The higher rate translates into higher costs for homebuyers. For a median-priced home, a rate of 4.4% on a fixed 30-year mortgage would cost someone an additional $250 a month. 

As a result, the jump in mortgage costs is pricing millions of potential buyers out of the market. The rate increases have priced about 7.9 million out due to higher mortgage rates. 

The rapid increase in home prices during the pandemic has pushed the dream of homeownership beyond the means of many middle-class Americans, who increasingly are bidding against investors and higher-income buyers for a limited pool of homes. One question many have asked is when prices might come back to earth; so far, however, there are no signs prices are softening.

In February, the median listing price for U.S. homes jumped almost 13% to $392,000 compared with the previous year. 

Surging Mortgage Rates Are Causing The Housing Market To Cool

Even so, there are some cracks emerging in the real estate market. For one, the pending home sales index dipped 4.1% in February. Experts say this is due to affordability concerns as well as a lack of inventory. The number of active listings dropped by almost 25% in February compared with a year earlier.

Buyers are also facing a triple-whammy. Not only are housing and borrowing costs higher now, but inflation is at its highest level in four decades. The typical household is likely to face an additional $2,000 in costs this year due to high gas prices. This is money that will erode their ability to spend on other goods and services.

Read More About Real Estate:

Existing Home Sales Plummeted By 7.2 Percent

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