Something Is Wrong in Housing - 300% Increase

Now that 68% of folks are living paycheck to paycheck, it doesn’t help that mortgage payments are 300% higher than they were five years ago.

Consumers continue to get squeezed and the math shows it makes more sense to rent than to buy.

The culprit?

Mortgage interest rates popped from 3% to 7% within just the last three years.

See prior to the last three years, we’ve seen interest rates drop practically for the last 35-40 years. In fact, studies show that up to 80% of real estate appreciation is due to falling interest rates.

Here’s an example.

• A buyer able to afford a $1,500 monthly payment could borrow:

  • ~$110,000 at 18% interest.

  • ~$355,000 at 3% interest.

With higher payments today caused by higher mortgage rates, more and more buyers are sidelined and now must rent. Owning is now a distant dream. This is why FHFA leader - Pulte, and others - complain incessantly (like whining children, yes really, I know — I have a 2 year old) for Fed Chair Powell to reduce rates to 1 or 2%.

Meanwhile, active inventory is stacking up and we are quickly transitioning from the strongest buyer market of all time to a seller’s market. At the same time, Seller’s are hallucinating 2021 prices and buyers are experiencing a “payment shock.” The disconnect is noticeable, to say the least.

One house we recently analyzed in the neighborhood I live in, must come down approximately 45% from its current list price to compete with the rental payment of a more upgraded house in the same exact neighborhood (plus a pool!).

But still - the naysayers exist who still say there is nothing different from 2022 to 2025… but the numbers are clearly now showing the change.

Stay tuned to find out what to do from here: