This week, the 30-year mortgage interest rate reached 7.2%, the highest level in a year and a half. This increase in interest rates, along with home prices close to record highs, has made the American dream of homeownership more difficult for millions.
Challenges for Home Buyers
Alexandra Dicandia, a biology teacher at Georgetown University, said: "We don’t want to buy this big beautiful house and just sit in it staring at each other while stressing over the mortgage payment every month." She and her husband, Edward Sherwam, both 33, are searching for their first home in the Washington area and hope to buy a house before starting a family.
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Factors Affecting Mortgage Rates
Mortgage rates were declining earlier this year, reaching 5.99% in late February. However, since the U.S. and Israel's attack on Iran on February 28, these rates have risen. The mortgage interest rate is heavily influenced by the yield on the 10-year Treasury bonds, which is affected by rising oil prices and commodity costs in the growing economy. The Federal Reserve raised its key interest rate this week to control inflation, and there is a possibility of further rate increases this year.
While the national average home price is nearing a record at $429,100 in August, the inventory of homes has also improved. In August, there were 1.62 million unsold homes available in the market, equivalent to 4.9 months of supply. This is the highest level in over a decade, giving home buyers more room to negotiate.
However, pending home sales, where contracts are signed but sales are not completed, have decreased by 4.7% over the past year, which economists attribute to the rising mortgage rates. Many young adults are returning to their parents' homes instead of renting or buying their own homes. Last year, a record 25.2 million adults under 35 lived with their parents.
Ian Suhan, 26, hopes to buy a home in Virginia, but the outlook does not seem promising. He said: "It’s frustrating. I would love to own my own home one day." He and his fiancée, Aiden Love, are looking for a home with enough space for future children and perhaps their mothers.
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