Mortgage Rates Drop Below 7%, but People Still Cannot Afford Homes

By Douglas A. McIntyre Published May 24, 6:50AM EDT

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Mortgage Rates Drop Below 7%, but People Still Cannot Afford Homes — © AlenaMozhjer / iStock via Getty Images

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Even with mortgage rates falling, homes are still far too expensive for most buyers.

Mortgage rates recently fell below 7% for a 30-year fixed-rate mortgage. It has been over a month since that last happened. The drop is meaningless. Rates are still far too expensive for most home buyers.

Mortgage rates were just under 3% at the start of 2022. The Federal Reserve had held its rates near zero since the financial disaster in 2007 and 2008. In those two years, the housing market plunged, with prices down over one-third in some regions. Foreclosures surged. Low mortgage rates were likely the only path to the improvement that took home prices to record levels.

Low rates sparked a rush of buyers, which helped drive home prices. They have almost doubled since the start of 2020. Another factor in this rise, more recently, is that the inventory of homes for sale has declined. It is classic supply and demand.

Last month, the median price of a home nationwide reached $420,000. A recent low supply of homes has been a reason for this rise. Few people want to sell a home on which they have a 3% mortgage only to buy one with a 7% mortgage. According to the National Association of Realtors, existing home sales fell in April, a trend that has gone on for over a year.

Most buyers find the cost of a home easiest to calculate using the monthly payment. Today, this monthly payment, including loans, insurance, and taxes, is about $3,000. At 3%, the figure is about $1,700.

Mortgage rates may have dropped below 7%, but for most people looking for a home, that barely matters.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.