American home buyers are getting less bang for their buck as mortgage rates are at their highest level in 16 years, and one prominent economist predicts the situation is unlikely to improve unless the Fed changes its stance on rate hikes.
There is a sign in front of a house.
The average of the 50 largest metropolitan areas in the country has a 9% decrease in the size of homes affordable on a $3,000 a month budget.
The 6.7% 30-year fixed mortgage rate is the highest it has been since July 2006 when the housing market crashed.
In San Diego and San Jose, attainable square footage is down 32% and 26%, respectively.
Mark Zandi, the chief economist at Moody's, wrote in a Monday note that mortgage rates won't significantly decrease until it is clear the Fed has ended its rate hikes.
Despite the extreme volatility in the housing market, with home sales rising even as prices fall, breaking basic market principles and sparking fresh concerns about a recession, experts don't think the housing market will bring down the economy as much as it did during the Great Recession. The analysts at Wells Fargo did not expect a repeat of 2008. A scenario in which conditions become as dark as during the financial crisis is all but impossible.
Bullish predictions that the Fed will abandon its most aggressive plans for rate hikes as it weighs how its policy affects financial markets has led to a rally in the stock market. Mortgage rates tend to rise as lenders adjust to federal policy, even though the Fed doesn't set rates. The rise in rates has caused Americans to pay 15% more on their mortgage payments.
Bigger homes for many buyers are caused by high mortgage rates.
There are early signs of a recession in the housing market.
Americans are paying 15% more on their mortgage payments compared to last month.
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