That's thrown cold water on the housing market. And mortgage rates have more than doubled this year. Now to fight inflation, the Fed is aggressively raising rates. But those super low rates combined with strong demand fueled an astonishing increase in home prices- between 30 and 40% percent in just 2 years depending on which housing index you look at. The Fed kept rates very low after the pandemic hit out of fear that the business shutdowns would spark a severe recession. "That party was fueled by cheap debt from the Federal Reserve, and now inflation is ending the party." "What we're experiencing now is like a hangover from this party in the housing market that was going on for the last two years," says Daryl Fairweather the chief economist at Redfin. These days a realtor can have an open house and nobody shows up. And as a result, it's no longer a frenzied housing market with bidding wars and multiple offers on every home. The higher mortgage rates are putting home ownership out of reach for millions of people. "They didn't need to, according to the contract we had signed, but they returned the $5,000 earnest money." "Luckily, the builders were more than understanding," she says. The couple lost a $1,000 dollar deposit they had put down. "We were told we have to pay off my husband's credit card and have to have a $100,000 down," she says. But with the higher rates, she and her husband can't qualify for a mortgage anymore. In Colorado, 32 year old Hillary Tollerud-Ho had also agreed to buy a new home. Those soaring mortgage rates mean some people are backing out of buying a house altogether. They can afford the higher mortgage payment, but it will mean they can't spend or save money for other important things. Mike is a CPA and Andrea works as an engineer. Rising rates have slowed the pace of home sales for 7 straight months as frustrated buyers throw up their hands and give up, unable to afford the bigger payments.Īndrea Johansen Andrea and Mike Johansen with some of the chickens at her parents' farm. That's the highest in 20 years, and up from 3% at the start of the year. The weekly average for a 30-year fixed rate loan is now 6.92% according to a closely watched report released today. Mortgage rates have gone through the roof. "Our belongings are in storage and that's almost $1000 a month." "We're living in the trailer because we can't afford to live anywhere else," Andrea says. And so what was supposed to be a quick stay in the camper between homes is dragging on.įor the Johansens it's looking like a $360,000 mortgage is going to cost them about $800 more on the monthly payment. But with supply chain delays it's not finished. The Johansens thought they'd be in a newly built house by now. "You're trying to have zoom calls for work and when the sun starts going down, they start all over again. "It starts at like 4:30 in the morning," Andrea says. It's temporary but the couple is crammed into a small camping trailer at her parents farm in western Massachusetts, across from a barn with 100 very noisy chickens. These days Andrea and Mike Johansen are not living their best life.
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