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Mortgage Volatility Poses Extended Challenges for Buyers and Homeowners

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Mortgage Volatility Poses Extended Challenges for Buyers and Homeowners

For two years, buyers and homeowners have been rocked by historic home price increases and rising mortgage rates, and a worsening affordability crisis may still be far from over

September 22, 2022
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Image: Stock.adobe.com

Two years of mortgage rate volatility and steadily rising home prices have forced buyers into a waiting game amid possibly the worst housing affordability crisis seen in decades, according to Zillow. After falling to 4.99% in August, the prime mortgage rate rose to 6.02% in mid-September, tacking on hundreds of dollars in monthly payments for buyers already squeezed by record inflation. 

In less than five months, a two percentage point increase in the 30-year fixed rate mortgage added $360 onto a monthly payment for the average U.S. home. As a result, a growing number of buyers are hesitant to purchase new homes, and homeowners who locked in low rates are equally hesitant to sell. 

Despite faster than normal income growth too, the mortgage rate increase piled on top of pandemic-era home price appreciation to decidedly pushed national homeowner affordability – the median household income’s share of the mortgage payment, property taxes, and insurance on the typical home – from the mid-20s earlier this year into the mid-30s by May. That’s a strain on national affordability not experienced since the mid-2000s.

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