Rising Rates Join Long List of Housing Dilemmas

This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing how soaring housing costs, rising rates, and declining affordability could impact borrowers and the housing market:

Homebuyers braving the hot U.S. housing market have run headlong into a striking transition. The average interest rate for a 30-year fixed mortgage jumped from around 3.2% at the beginning of 2022 to 5.3% in mid-May, the highest level since 2009.

This rise was sparked by the Federal Reserve’s commitment to raise the federal funds rate — a key benchmark for short-term interest rates — to help control the highest inflation in decades.

Although mortgage rates are not directly tied to the federal funds rate, all borrowing costs are influenced by the Fed’s monetary policies. Mortgage rates tend to track changes in the 10-year Treasury yield, which is sensitive to changes in the funds rate and also fluctuates based on the bond market’s longer-term expectations for economic growth and inflation.

Housing Costs Are Soaring

For nearly two years now, buyers have faced an intensely competitive housing market characterized by historically low inventory, bidding wars, and escalating prices. The national median price of existing homes rose 14.8% over the year ending April 2022 to reach $391,200.

Home prices are rising in every region, and 70% of the nation’s 185 metro areas experienced double-digit annual increases in the first quarter. In a notable shift, price gains in affordable small- and mid-size cities outpaced…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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