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The housing market correction is far from over — mortgage rates soar again over 6%

This spring, Fed wipes books against inflation ole. It goes like this: The central bank applies an increase in long-term interest rates — including mortgage rates — by signaling that short-term rates will soon rise. That spike in mortgage rates then pushed both home sales and homebuilding lower. That reduces demand for goods (like wood and concrete) and durable goods (like countertops and refrigerators). Those economic contractions then spread to the rest of the economy and, in theory, help curb inflation.

The home repair phasehas, of course, begun.

Across the country, home shoppers are pausing their home search. On an annual basis, new house for sale and Existing home sales currently down 29.6% and 20.2% respectively. And Single-family housing begins and Mortgage buying app down 18.5% and 23% respectively. Simply put: Housing operations are under contract — fast.

Whatever you call it — a home repair, housing recessionor housing recession—The end is far from over. Just look at mortgage rates. At the beginning of the year, the average 30-year fixed mortgage rate stood at 3.1%. That is long gone. On Thursday, it went up to 6.23%– second highest mortgage rate in 2022.

If a borrower mortgaged $500,000 at a rate of 3.2%, they would see a monthly payment of $2,162. At a rate of 6.23%, that monthly payment would be $3,072 over a 30-year loan. This soaring mortgage rate — along with foam house prices it jumped 43% during the pandemic—Just making monthly payments is unsustainable to many who will be buyers. Other households (see chart below) have completely lost their mortgage status.

As long as mortgage rates and home prices remain at these high levels, industry insiders expect the housing market to continue to plunge.

Earlier this week, Goldman Sachs makes revised forecast. The investment bank now forecasts that housing GDP will shrink by 8.9% in 2022 and another 9.2% in 2023. That would mark the first housing downturn of the post-financial crisis era. . Culprit? A decline in affordability (see chart below) due to skyrocketing mortgage rates.

Bad news for buyers? It may take a while before more discounts are available.

Mark Zandi, chief economist at Moody’s Analyze, tell Luck.

Once the U.S. labor market begins to weaken, Zandi says financial markets should start to ease mortgage rates — in theory, a weakened labor market, coupled with falling inflation, should forcing the Fed to reduce inflation. However, if the overheating labor market persists, the rate could be even higher.

“Of course, if the job market is to recover, the Fed will need to tighten even more aggressively than the market predicts, and mortgage rates [would go] higher and the ultimate damage to the housing market [would be] older, “Zandi.

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