In the US, buyers lining the sidewalks outside of frenzied open houses this spring; the Pandemic Housing Boom was already in its final inning. The red-hot housing market is quickly shifting in the face of spiked mortgage rates, which had jumped from 3.2% in January to over 4% by late March.
The bad news for mortgage brokers and builders? This housing correction is far from over.
The shock hitting the U.S. housing market continues to grow: On Monday, The average 30-year fixed mortgage rate jumped to 6.7.
That marks both the highest mortgage rate since 2002 and the biggest 12-month jump since 1981.
Higher mortgage rates lead to some borrowers who must meet lenders’ strict debt-to-ratios losing their mortgage eligibility.
It also prices some buyers out of the market altogether. As buyers pull back, the housing correction will cause inventory levels to rise and home sales volumes to fall.
Buyers are dropping out of the market, with the number of pending transactions down by 24 percent since this time last year, according to the National Association of Realtors.
Renters may not like the fact that the median rent is up by 20 percent in two years, according to Redfin, but they probably aren’t likely to go house shopping, either.
Both because they can’t afford it, and because confidence in the housing market confidence that you’re making a good investment is at just 46 percent, according to Freddie Mac, down 20 points from last spring.
As the United States emerged from the pandemic, housing started surging, and it looked like we might start to make up the deficit. Not anymore. Homebuilders are holding off; building permits issued in August fell by 14 percent from a year earlier.
High-interest rates make it expensive for developers to borrow money for big projects, and also reduce the price point they can expect to sell for. To make matters worse, an immigration slowdown has made it hard to find people to build houses. Foreign-born workers make up 30 percent of the country’s construction workforce.
Matthew 6:19 Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal:
Matthew 6:20 But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal:
Matthew 6:21 For where your treasure is, there will your heart be also.
Matthew 6:24 No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and money.
Hebrews 13:5 Let your conversation be without covetousness; and be content with such things as ye have: for he hath said, I will never leave thee, nor forsake thee.
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