Rising Interest Rates Causing Potential Homebuyers to Reconsider
New York, NY, September 2, 2022-"Home buyers are feeling the pinch of rising costs more than renters,” reports the Wall Street Journal.
“The median monthly mortgage payment was almost one-and-a-half times as much as the median monthly asking rent in the second quarter, the largest differential in records going back to 2009, according to data tracked by the Mortgage Bankers Association, an industry trade group.
“Home prices and rents have risen briskly over the past year-and-a-half. But the rising relative cost of buying is largely the result of additional interest buyers are paying when they lock in mortgages at the highest rates in years.
“The average 30-year fixed mortgage rate rose to 5.66% this week, nearly double what it was a year earlier, according to a Freddie Mac survey. The shift is a shock for many buyers because low interest rates in the past few years had ushered in a period of greater affordability and brought many first-time buyers into the market.
“In the fourth quarter of 2020, median mortgage payments and asking rents were basically equal at just under $1,200. Since then, rents have risen 10% to $1,314 in June, according to Census Bureau data, while mortgage payments have risen 58% to $1,893, according to MBA mortgage application data. The ratio between the two stood at 1.44.
“‘The ratio is a great indicator for households deciding ‘should we rent or should we go ahead and buy?’’ said Edward Seiler, a housing economist at the MBA.
“By some measures, housing is the least affordable in decades because the rise in rates has collided with a jump in home prices. With inflation hitting all facets of daily life, the higher costs of buying are encouraging some prospective buyers to bite the bullet and keep renting, even if their landlords are asking for more money.”