Mortgage rates reach 7 percent – housing prices could drop 20 percent.
An online real estate marketplace recently reported that barely one in five U.S. households could afford homes listed for sale in 2022. This represents the lowest home affordability gauge on record. According to Redfin’s chief economist, “Housing affordability is at the lowest level in history, which is widening the wealth gap—especially between generations.”
The fact that the average rate on a 30-year fixed mortgage is back over 7 percent contributes to issues with affordability. Mortgage rates somewhat follow the yield on a U.S. 10-year Treasury note. The trajectory for rates to go even higher is stimulated by concerns about inflation not slowing down.
The Federal Reserve Bank of Dallas recently predicted that home prices across the country could fall 15 to 20 percent. “Such a negative wealth effect on aggregate demand would further restrain housing demand, deepening the price correction and setting in motion a negative feedback loop,“ a Dallas Fed economist said.
According to reports, homes are 32 percent more expensive now than before the pandemic began in 2020, even after having decreased by 12 percent from their peak last May.
As the Lord Leads, Pray with Us…
- For the chairman and members of the Federal Reserve Bank as they address inflation through interest rate hikes.
- For the president and his advisors as they evaluate measures that impact the national economy.
- For God’s grace and provision for those who are in search of affordable housing.
Sources: CNBC, The Real Deal, Newsmax
