You Can’t Afford A House

The era of high home prices and low mortgages ended months ago. As work from home made Americans more mobile, demand in many markets soared, and with that prices. This was particularly true in friendly climate areas like Tampa and Phoenix. (It turns out that global warming took away that friendliness).

A slowdown in mobility married with high-mortgage interest rates moved home prices down. That drop may have ended, as the number of people who want to sell homes has fallen. People do not want to trade mortgages they got at 3% for a new home with a much more expensive mortgage. Renting is a poor option because rental costs have jumped over the last two years. And buyers cannot afford homes that were once within their budgets.

Interest rates reached 7.09% for a 30-year fixed mortgage. That is a two-decade high. The best advice to people who want homes is don’t buy one. The monthly payment for a $450,000 home is $1,900 at 3% and $2,900 at 7%.

There is a broadly held assumption that with unemployment at 3.6%, everyone will have a job forever. That assumption has occasionally happened before. However, the strong job markets do not last. Recessions come about every five years, if not more often.

Inflation rates may have improved, which should help the economy, but the Federal Reserve does not believe it has beaten inflation down enough, so it will continue to push rates higher. At some point, that will make the cost of living for both businesses and individuals too high for strong employment to remain.

Foreclosures have nearly disappeared in America. As long as employment is high, that will continue to be the case. However, a slower economy tied with high mortgage payments is a potential disaster, even if it may be months or even years away.

Hold off buying a house.

Also check out: these are the American cities with the most million-dollar homes.