Mortgage rates reached a record high of 7.04% this week, according to Freddie Mac’s latest survey of lenders, marking the fifth consecutive weekly increase and the highest level since May. The surge is attributed to stubborn inflation, which has pushed the yield on the 10-year US Treasury note higher.
The Federal Reserve’s decision to only signal two rate cuts for this year may not come until later in the year, according to Wall Street’s expectations. This leaves first-time buyers and low-income households with little hope of homeownership amidst rising home prices and soaring insurance premiums.
Freddie Mac estimates a housing shortage of 3.7 million units nationwide, contributing to an affordability crisis. Economists warn that mortgage rates will likely remain above 6% through 2026, further exacerbating the issue.
While some welcome improvements in total housing inventory last year, the lock-in effect may not be fully undone this year, maintaining persistent housing shortages and pushing up prices. The high borrowing costs also pose a challenge to the pace of home construction.
For many, homeownership has become an unattainable goal due to financial constraints. Jeff Howard, a 35-year-old renter in Atlanta, is among them. With maxed-out credit cards and a struggling job after obtaining a master’s degree, he views waiting on the sidelines as his best option, with no immediate plans for homeownership in sight.
Source: https://edition.cnn.com/2025/01/16/economy/mortgage-rates-7-percent/index.html