Mortgage rates surged to their highest level since 2008 after the Fed’s rate hike. According to Freddie Mac, the 30-year fixed mortgage rate rose to 5.78% from 5.23% the previous week. In addition to increasing the amount buyers will pay to borrow for their mortgage, higher interest rates lower their purchasing power.
This means that buyers can afford fewer houses than they could at the beginning of the year. While it is crazy that it has moved so quickly, the reality is that buyers can afford to buy 25% less expensive homes than on January 1st. Nevertheless, home prices continue to rise significantly, making it even more difficult to find homes at this price level.
Obviously, these two trends moving in tandem is unsustainable. Prices will have to start to react negatively to increasing mortgage rates or the long-standing seller’s market will flip radically in the direction of buyers. Regardless, we are in for change.