Not the best sign for folks who were maybe hoping to get a house in 2025:
Mortgage rates topped 7% this week, a key psychological threshold, in a sign of the US housing market's unrelenting affordability challenges.
The average rate on a standard, 30-year fixed mortgage was 7.04% in the week ending January 16, according to a survey of lenders released Thursday by Freddie Mac. It's the fifth consecutive weekly increase and the highest level since May.
This comes amid recent record-high housing prices in the U.S. market:
It's a double-edged sword, of course. If mortgage rates fall too low, then the housing stock will shrink even more as people take advantage of the low rates, driving up home prices even further.
But of course high mortgage rates make homes unaffordable in a similar way. So either way you slice it at this point, homes are just crazy expensive. The Best Economy™ ever is actually the worst.
The rise in rates, meanwhile, is a dogged one:
Mortgage rates this week were nearly a full percentage point higher than in late September, when the Federal Reserve began to cut interest rates. The yield on the 10-year US Treasury note, which influences mortgage rates, ratcheted higher over the past several weeks on signs of stubborn inflation, but tumbled Wednesday after the latest Consumer Price Index showed progress is back on track.
So what's ultimately driving this rough situation? Mostly low housing stock. Freddie Mac "estimates there is a housing shortage of 3.7 million units" in the U.S.
Why is that?
Well, the U.S. population has jumped from just over 300 million to almost 350 million since the 2008 financial crisis, when the subprime lending scheme collapsed and home prices cratered. The majority (perhaps as high as 34 MILLION of the 43 million population increase) is due to mass migration that is competing with Americans for homes.
Now that Millennials are finally emerging from the haze of student debt and inflation with enough money to buy a basic starter home (a decade later than previous generations), they've found that nothing is affordable.
Owning a home has become a pipe dream for Jeff Howard, a 35-year-old renter living in Atlanta. Not only has Howard struggled to find a job after obtaining a master's degree in health care administration in 2019, but he has also maxed out all his credit cards, making homeownership a far-fetched financial goal.
Waiting on the sidelines has proven to be Howard's best option.
And to add insult to injury, new government regulations make construction very difficult, so new homes take forever to build and are very expensive.
Translation: Open borders and bureaucratic red tape have killed the American Dream.
High mortgage rates are just the sour cherry on top of the garbage heap.
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