Marcus & Millichap Research Report: Housing Affordability
August 29, 2022 | Marcus & Millichap
Mortgage Rate Surge Thwarts Affordability; Apartments Offer Relief from Housing Shortage
Fight against inflation derails single-family housing. The pandemic and ensuing lifestyle changes dramatically impacted the single-family market. A rush of people sought larger living options to accommodate at-home work and education. Exceptionally favorable financing fueled the market, resulting in a massive squeeze of listing inventories. With more people seeking homes than the market could service, prices rose at a staggering pace. When the Federal Reserve stepped up its fight against inflation by aggressively raising the overnight rate by 225 basis points through July, however, it triggered a mortgage rate surge and the housing market took a hit. The average rate for a 30-year fixed-rate mortgage surpassed 5 percent in the second quarter, the highest mark since the Global Financial Crisis. Additional Fed rate hikes may put even more pressure on the cost and criteria to obtain a home mortgage, condensing the buyer pool and cooling the hot sector.
