Share“Mortgage rates surged to 5% for the first time in over a decade (since February 2011). Elevated inflation continues to push up mortgage rates. While the Fed's next meeting is in early May, inflation will determine how aggressive the Fed's next steps will be. According to Freddie Mac, the 30-year fixed mortgage rate rose to 5% from 4.72% the previous week. Since the beginning of the year, mortgage rates rose by 1.8 percentage points. This change added about $400 to the monthly mortgage payment for a median-priced home. This means that potential buyers need to spend more of their budget on housing to buy the typical home.
In the meantime, although inflation rose 8.6%, wages decreased 2.7% in March compared to a year ago. Inflation overshadowed all wage gains. Real wages - on a year-over-year basis - have dropped consecutively since April 2021. Comparing inflation with real wage growth since 2008, this is the first time that inflation has risen so much faster than wages. With rising borrowing costs, expect about 16 million households to be priced out of the market this year. As a result, NAR forecasts home sales activity to drop about 10% in 2022.”
