Ever since the pandemic the cost of living in the U.S. has been proportionally higher than many have seen in their lifetimes, rivaling the inflation and out of control interest rates of the late 1970s and early 1980s. People see it and feel it every day at the grocery store, where eggs that cost $2 in 2020 are still selling for $6.
Despite repeated but empty assurances from the Biden administration, inflation simply has not gone down enough to make regular life as affordable as it was just a few years ago for working Americans.
The problem has severely affected the housing market, too. This past July saw the lowest sales of existing houses since the same month in 2012. The number sold was 4.1 million. It seems many Americans are trying to wait it out and keep renting until home prices become more realistic.
The price of a house is not the only consideration for homebuyers; the interest rate on their loans can be just as important, because just a few percentage points makes a huge financial difference over the life of a typical 30-year mortgage. For example, say you take out a $300,000 loan with a five percent interest rate. Over 30 years, you will pay $279,000 in interest, and that’s on top of the $300,000 you have also paid back.
Now let’s add a point and half to match the average interest rate on a mortgage today, according to Freddie Mac. A 6.49 percent rate on a 30-year loan of $300,000 dollars will mean you have to shell out a whopping $381,000 in interest alone. That’s more than the amount borrowed.
Is it any wonder homebuyers are sitting it out for now?
Of course, rates have dropped somewhat since their peak, and that was enough to pump up home sales for a while, according to Redfin real estate agent Nicole Stewart. But more people are now waiting to see if the rates will “drop even more,” she said.
Homes that would have cost, say, $200,000 five years ago are now being priced at $400,000 or higher, depending on the area of the country. The dramatic jump puts the median sale price of a home at nearly $440,000 as of July, 2024.
Realtor Stewart said she thought many people were waiting until after the presidential election to see what happens to home prices, but that the election will probably not affect prices as much as they believe.
