The country’s mortgage rates, which have been steadily climbing for the last two years, are now at their highest in nearly a quarter of a century. The rate for a 30-year fixed mortgage has hit 8%, a level it hasn’t reached since George W. Bush was first elected president in 2000. According to statistics released by the Federal Reserve Bank of St. Louis, the rate began a measurable increase in November of 2020 when it stood at 2.7%, rising to 5.3% by the spring of 2022, and 6.4% in January of this year. The final more than 1% increase has taken place since August. What happens next appears to be anyone’s guess: according to an outlook just published by the Mortgage Bankers Association, it is thought that the rate will swiftly drop to 7.2% by December, on the way down to 6.1% by the final quarter of next year. In a recent letter to Federal Reserve System Chairman Jerome Powell, several industry groups have noted that increased rate hikes have “exacerbated housing affordability and created additional disruptions.” The letter, jointly signed by the National Association of Realtors, the National Association of Home Builders, and the Mortgage Bankers Association, additionally made note that the nation’s real estate market is “already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume.” In real-life terms, the site MarketWatch looked at the average priced home of $412,000 and determined that with an 8% mortgage rate and a 20% down payment, a new homeowner would have to pay “roughly $3,019 per month.” “To afford that on a monthly basis,” the publication continued, “a prospective buyer would need to make $120,773.” Reporting on a house price index produced by the financial services firm First America, the Wall Street Journal is noting that “home purchasing power is at its lowest point in more than three decades.” The publication added that a combination of home prices and mortgage rates have “risen 17% since one year ago, and 44% since January 2000.” But what goes up, almost always goes down: the 8.1% mortgage rate record in 2000 gradually declined to 4.3% over the course of the next decade. By Garry Boulard
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