Homeownership is becoming a pipe dream for most Americans, as average monthly mortgage payments are now nearly double what they were when Biden took office.
Interest rates above 7 percent and rising home prices mean buyers are facing one of the least affordable markets in recent history.
Analysis even shows that it makes more financial sense to rent than to buy, with new rental contracts being on average €1,000 cheaper per month than home loans.
But despite all the doom and gloom, experts are urging potential buyers to stop waiting to find their dream home and prepare for an environment of 'higher and longer interest rates'.
Average monthly payments for a new home rose to $3,322 in the third quarter of the year, data from a real estate investment trust shows CBRE shows. It means they are up 90 percent since then the last quarter of 2020 – just before Biden took office in January 2021 – when it was just $1,746.
Homeownership is becoming a dream for most Americans as average monthly mortgage payments are now nearly double what they were when Biden took office
Higher interest rates and rising home prices mean buyers are facing one of the least affordable markets in recent memory
The analysis is based on the cost of a $430,000 home with a 30-year mortgage and assumes a 10 percent down payment. It also does not take into account a slight decline in home loans in recent weeks.
Mortgages have been pushed up by the Federal Reserve's aggressive campaign to raise interest rates from near zero in April 2020 to a 22-year high of between 5.25 and 5.5 percent.
Higher interest rates are used to tame blazing inflation, in the hope that they will curb consumer spending and bring prices back under control.
But cooling inflation – currently hovering around 3.2 percent annually – has allowed the Fed to hold rates steady twice in a row since July.
As a result, mortgages have finally started to fall. The latest data from government-backed lender Freddie Mac shows that the average interest rate on a 30-year fixed-rate mortgage has fallen to 7.03 percent – the lowest level since early August.
But today, a Bank of America (BofA) executive warned homebuyers not to wait around to see how low interest rates can go.
Matt Vernon, head of consumer lending at BofA, said Business insider: 'Timing the market is never right.
Mortgages have been boosted by the Federal Reserve's aggressive campaign to raise interest rates from near zero in April 2020 to a 22-year high of between 5.25 and 5.5 percent
A recent report from real estate portal Realtor.com predicts that both prices and mortgages will fall next year – albeit modestly
“It's really when you're financially stable, emotionally ready, and ultimately find that home that fits your dreams and/or your needs.”
Wells Fargo analysts also warned in October that buyers and sellers should prepare for a “higher, longer interest rate” environment.
Similarly, a recent report from Realtor.com warned that there wouldn't be a “major breakthrough” in the housing market next year, but prices would drop slightly.
Economists at the real estate platform predicted that the average interest rate on a 30-year home loan would fall to 6.5 percent by the end of 2024.
Meanwhile, home prices will decline slightly by 1.7 percent, from $391,300 at the end of 2023 to $384,400 in 2024.
And the new year will even offer renters some reprieve, as rents are expected to fall 0.2 percent, the report said.
Danielle Hale, chief economist at Realtor.com, said: “We won't see a major break in the gridlock the housing market has seen over the past year, but 2024 will be a small step in the right direction. It will no longer get worse.'