Housing Market Hits Level Not Seen in 15 years

Posted by Leo Clark. on Tuesday, April 12th, 2022 at 9:14pm.

Higher mortgage rates impact housing marketThe nation’s housing market just hit a level it hasn’t seen in about 15 years, and that’s not exactly a good thing for borrowers. This past December, the average rate for a 30-year fixed mortgage was 3.11-percent. 

Recently, the average rate went up to 4.72-percent. That can make a real difference when it comes to monthly payments.

It could mean hundreds of extra dollars each month, or even more than an extra $100,000 over the course of a 30-year loan, depending on the size of the mortgage. The recent mortgage rate hike has some experts saying buyers are in a similar situation as they were in 2007. 

That’s the last time the mortgage-payment-to-income ratio topped 29-percent, but it appears we’re now seeing the same thing. According to recently published reports, a typical American household must now spend 29-percent of its monthly income on a mortgage for an average-priced home. 

To put it in perspective, the ratio averaged just under 20-percent in the 2010s. Even as recently as this past December, the ratio was lower and sat at 24-percent. 

So, does that signal another housing crash like we saw in 2008? The number looks similar on paper, but the situation is not. 

Prior to the crash, homebuilders were constructing homes at an extremely high level. When the market slowed, supply was too high. 

Right now, homebuilders aren’t meeting housing demand. Other experts add that because most existing homeowners have a fixed-rate mortgage, increasing the rate will mostly affect first-time buyers. 

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