The average rate on a 30-year fixed mortgage hit 7.2% in the week NBC News reported on it, the highest in a year and a half. Home prices sit near record highs. Together, NBC reported, the two are pushing homeownership further out of reach for millions of Americans.
Alexandra DeCandia, who teaches biology at Georgetown University, and her husband, Edward Schrom, both 33, are looking for a first home in the Washington area. They want to buy before starting a family. “We don’t want to buy this big, beautiful house only to just sit in it, staring at each other, stressing about a mortgage payment every month,” DeCandia said. Working out the decision in a shifting market, she said, is “very stressful.”
Rates turned in February
Mortgage rates had been falling earlier in the year, touching 5.99% in late February. They have climbed sharply since the US and Israel attacked Iran on February 28. Rates follow the yield on 10-year Treasury bonds, which has been rising as oil prices drive up the cost of goods across the economy.
More increases could come. The Federal Reserve raised its key interest rate that week to get a handle on inflation and suggested it may raise it again this year.
Prices, supply and sales
The average home price nationwide was $429,100 as of August, near a record. Inventory offers some relief. The National Association of Realtors counted 1.62 million unsold homes in August, a 4.9-month supply and the highest level in more than a decade, which gives buyers more room to negotiate.
Even so, pending home sales fell 4.7% over the past year, a drop economists attribute to higher mortgage rates.
Kerry Adams, a Realtor with Compass Real Estate in the Washington area, said the mood among buyers has changed. “They’re saying: ‘I’m already feeling it at the gas pump, at the grocery store, and now I’m feeling it in mortgage rates. Maybe I’ll sit on the sidelines a little while longer,’” she said.
Back in the childhood bedroom
Many young adults are moving in with their parents rather than renting or buying. A record 25.2 million adults under 35 lived with their parents last year, according to Realtor.com. The median age of a first-time buyer is now 40, an all-time high, the National Association of Realtors says.
Ian Sohan, 26, hopes to buy in Virginia with his fiancee, Eden Law, but says the math is not working. “It’s discouraging,” he said. Houses that fit their needs, with room for future kids and maybe their mothers, start around $600,000 in Northern Virginia. In Arlington, their ideal neighborhood, they run closer to $1 million.
Sohan said he has not been priced out entirely, but he may be pushed out of the areas he wants or face a longer commute. The bigger worry is confidence: it is “a lot more intimidating” to buy without knowing the economy will let him afford the house five or 10 years on, “let alone 30 years.”
