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The US housing market is going through tough times

Mortgage rates in the US rose by more than 0.5% this week, an increase not seen in decades. This may be a problem for many Americans.

The current economic situation is driving extreme prices of everything around the world. The problem arises in the energy and food markets. But now mortgage rates show us that we cannot expect much positive news in the housing market either.

So the rise in mortgage rates gives us another perspective on the economy. At the very time when the stock market is experiencing a correction, inflation is hitting records and the Fed is combating this with unusually high-interest rate hikes.

Wooden house on the background of 100 american dollar bills

Changes especially in long-term mortgages

On the subject of mortgages, Nadia Evangelou, chief economist at the National Association of Realtors, mentioned.

“If buyers want to pay the same monthly mortgage payment as they did at the beginning of the year when rates were about 2.5% lower, they will have to look for cheaper housing. Specifically, buyers can afford to buy homes that are 25% cheaper than at the beginning of the year.”

The 30-year fixed-rate mortgage this week was approximately 5.78%, which hasn’t been seen in America since 1987. For perspective, a year ago, the 30-year rate was only 2.93%.

These rates are dependent on inflation and where monetary policy, led by the Fed, is headed.

The rental market will grow

So new home prices will likely continue to rise for some time. Even the current situation may not manifest itself for months, but new home prices could continue to rise for several more years, and thus fewer and fewer new homes will be sold.

More expensive home ownership means more people will want to go into rental properties. This, of course, puts more pressure on rentals and higher demand for this type of housing means higher prices.

Read also: China has significantly reduced exports of gasoline

We can increasingly expect to see the problem of property prices rising all over the world, as the construction industry will not escape the rising cost of fuel and basic materials.

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...

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