Exchanges High mortgage rates, limited inventory continue to challenge the US housing market
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Mar 12, 2024 Exploring the impact of high mortgage rates and limited inventory on new home sales, challenges in the housing market, 5% home price appreciation projected for the US, analysis of Federal Reserve rate cuts on mortgage rates, and a legal disclaimer at the end of the episode.
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Affordability Shock From Higher Mortgage Rates
- Mortgage rates rising from ~3% to ~7–8% created a large affordability shock that removed demand from the market.
- That payment jump (about $1,800 to $3,000 on a $450k mortgage) explains much of the sales collapse.
Pandemic Pull-Forward Boosted Then Hindered Sales
- Post-pandemic demand was pulled forward as many people changed housing situations, creating a later give-back in sales.
- Similar spikes and subsequent pullbacks occurred after past policy moves like tax credits.
Lock-In Effect Limits Supply
- The lock-in effect keeps homeowners in place because moving means taking on a much higher mortgage rate.
- Roughly 97% of the mortgage market can't refinance into current higher rates, reducing turnover and supply.