Homeowner Marie Cantu, 35, lives just outside of Seattle, and has been looking to buy a single-family home outside of Boston to be closer to her family.<\/p>\n
The mom-of-five has been \u201cseriously looking\u201d for three-bedroom homes for the last six months. Cantu is hoping to rent her home in Washington, and move roughly before the school year starts, so that her children can adjust better to the new neighborhood. Cantu, a stay-at-home mother, homeschools her children.\u00a0<\/p>\n
Higher rates make housing more expensive \u2014 and less affordable \u2014 for aspiring homeowners.\u00a0They have also been a major factor in keeping would-be home sellers out of the housing market. <\/p>\n
On Wednesday, the U.S. Federal Reserve raised the benchmark rate by 25 basis points in line with most Wall Street economists\u2019 expectations, making it the 11th rate hike among the last 12 Fed meetings. The benchmark rate has now reached a 22-year high of 5.25%-5.5%.\u00a0<\/p>\n
Cantu is fortunate in that she isn\u2019t in a position where she has to sell her home. Her home, which she bought for $700,000, is fully paid off.<\/p>\n
She is looking to buy with cash and a partial mortgage at the prevailing mortgage rate. She said that her \u201cideal\u201d rate would be 3% to 4%, but acknowledges that those rates were historic lows seen during the pandemic. But Cantu said she has accepted higher rates as the new normal, given that the 30-year mortgage interest rate is now hovering just over 7%, more than double what it was two years ago.\u00a0<\/p>\n
But the house search recently hit a major speed bump. Cantu told MarketWatch that she put an offer in a couple of weeks ago on a home \u2014 the only time she got close to buying a home she really wanted \u2014 she was outbid. \u201cIt was listed at $699,000,\u201d Cantu said, and she offered $715,000. \u201cAnd someone outbid us,\u201d she said.<\/p>\n
Cantu\u2019s brush with the hot post-pandemic housing market \u2014 where inventory has been so low that home buyers are once again competing with each other to buy homes \u2014 reveals how mortgage rates have pushed the U.S. housing sector into a fundamental supply-and-demand problem.<\/p>\n
Demand continues to remain steady as home buyers adjust to the new normal of higher rates. But housing inventory is at a record low, with under a million single-family homes listed for sale on the market.\u00a0<\/p>\n
The lack of homes is due to the fact that the vast majority of homeowners currently have a 30-year mortgage \u2014 well below today\u2019s rate of 7%. They have little reason to sell, as doing so may require them to purchase another home with a much higher mortgage rate.\u00a0<\/p>\n
\n \u201c<\/span>\u2018I don\u2019t think people should expect mortgage rates to go back to the 3% range. We have short-term memories when it comes to where rates were before COVID.\u2019\u201d<\/span>\n <\/p>\n
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