Home payments in October compared to this time last year have skyrocketed, leaving many Americans paying significantly more per month under the weight of 20-year-high mortgage rates.
The average 30-year fixed-rate mortgage hit 6.92% in October 2022, with average monthly payments of $2,400 for a median-priced home, according to a calculation by Axios; however, in October 2021 mortgage rates were on average 3% with monthly payments around $1,500, reflecting a $900 year-over-year increase. The spike follows the Federal Reserve’s decision to hike the federal funds rate several times since March, causing mortgage rates to increase.
Mortgage rates are predicted to continue climbing as the September Consumer Price Index (CPI) has left many analysts pointing to another rate spike, CNBC reported.
“The Federal Reserve has made it very clear they’re committed to price stability, they’re committed to reducing the inflationary pressures. The more inflation comes in above expectations, the more they’re going to have to prove that commitment, which means higher interest rates and cooling in the underlying economy,” Michelle Meyer, chief U.S. economist at the Mastercard Economics Institute, told CNBC.
Demand for housing in the U.S. is decreasing steadily as supply continues to climb, with the median home price increasing by 13.9% from last year to $427,000, according to a Realtor.com monthly housing trends report. Housing supply increased 26.9% year-over-year in September, yet the staggering mortgage rates have left sales continually declining.
“Recent data does show some deceleration in listing prices, and a seasonal pull back that is typical of this time of year. On the flip side, this cooling is likely one reason why fewer sellers entered the market in September,” Danielle Hale, chief economist for Realtor.com, said in September.
Alongside a decrease in demand for homes, rental markets have seen significant decreases for demand in the third quarter of 2022, leaving many rental buyers in the same position as home buyers as they “wait and see” where the economy will go, RealPage reported.
Apartment demand in the third quarter of 2022 dropped into the negative for the first time in 30 years as many renters lost confidence in the market due to economic uncertainty, according to RealPage analytics.
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