The Patriot Post® · Bidenomics Sends Mortgage Rates Soaring
Mortgage rates are literally going through the roof, as Joe Biden might say.
He’s serious, he’s not joking, and this is not hyperbole.
Yes, thanks to the spending binge of Biden and the Democrats, inflation is making everything more expensive. To put it simply, whenever the government prints money it doesn’t have, the value of the dollar decreases. And while our money loses its purchasing power, prices of goods and services increase. Unsurprisingly, we’ve watched prices rising steadily in the grocery aisles, on the car lot, and in the real estate market.
This is certainly bad news not only for home buyers but also for those stuck with a home that’s too expensive to sell.
“Higher mortgage rates exacerbate the supply situation,” reports CNBC. “Current homeowners are reluctant to list their homes for sale because the vast majority of them have rates around or below 3%. To move to another home would mean more than doubling that rate. It has created what is now being called ‘golden handcuffs’ among potential sellers.”
CNBC adds: “The average on the 30-year fixed last year at this time was around 5.5%. For someone buying a $400,000 home, with 20% down on a 30-year fixed loan, the monthly payment today, with principal and interest, is roughly $420 more than it would have been a year ago.”
It’s no wonder that many who purchased a home in 2023 already wish they hadn’t. According to one report, more than half of Americans think it’s a bad time to sell and a bad time to buy a home. Even worse, since 2022 the percentage of home buyers who regret their purchase has risen from 72% to 93%, with 62% of recent homebuyers struggling to make their mortgage payments.
“Even prior to this recent surge in mortgage rates,” reports Fortune, “housing affordability, as monitored by the Atlanta Fed, had already deteriorated beyond the levels seen at the housing bubble’s peak in 2006. Once this latest mortgage rate surge is factored in, August 2023 will become the worst month for housing affordability this century.”
No wonder demand for mortgages is at a three-decade low.
But how did we get to this point? According to Fortune: “The journey to this predicament can be traced back to last year’s sharp rise in mortgage rates, which escalated from 3% to over 7%. That rate surge, coupled with the Pandemic Housing Boom pushing U.S. home prices up over 40% in just over two years, deteriorated housing affordability (or better put the lack thereof) across the nation.”
And it gets worse.
As Fox Business reports, “On top of high mortgages, there’s also a nationwide housing supply crunch: sales of previously owned homes tumbled 2.2% in July, while the National Association of Home Builders reported new home construction sentiment dropped six points in August.”
As proof that history repeats itself, we’re also making some of the same mistakes that led to the 2008 market crash. Some of these mistakes are intentional, too — such as the Biden administration forcing potential home buyers with higher credit scores to pay more for financing a home in order to shuffle money to those with poor credit scores. Hey, what could go wrong?
“Progressives claim these rules need to be altered so those who have historically had a harder time breaking into the housing market can get a shot,” write Edward Pinto and Tobias Peter of The Wall Street Journal. “This approach has backfired. The last great credit expansion, done with the goal of expanding homeownership in the runup to the 2008 crisis, left some 14 million borrowers, many of them minorities, seriously behind on their mortgages as home prices crashed by more than 25%.”
For those who claim that the overall numbers for home sales in the past few years aren’t bad at all, that’s in part because real estate investors and corporations are buying up homes and turning them into rentals to take advantage of soaring rental rates.
Right now, the news isn’t good for those who want to buy or sell a home, but let’s hope the 2024 election brings about new leadership that fixes the economy and prevents a housing crash and another Great Recession like we saw in 2008. That’s a history none of us want to see repeated.