Mortgage interest rates are well above 7%, after starting the year at a little over 3% – and landlords are also noticing a cool down in the rental market.
To put it in perspective, a $400k house bought at a 3.25% interest rate earlier this year would have a mortgage payment of around $1750, but the same house would cost nearly $2800 a month now with a 7.5% interest rate, an increase of over $1000.
“High interest rates are also weighing on home prices,” CNBC reported.
“While prices are still higher than they were a year ago, the gains are now slowing at a record pace.”
“Homebuyers are also reconsidering their purchases.”
Interest rates are so high that there’s less than 150,000 borrowers who would benefit from refinancing, out of the millions of homeowners in the country.
Additionally, rent increases are starting to slow down in many parts of the US.
“It’s a dramatic reversal from just months ago, when people were fighting over a limited supply of apartments, getting on waiting lists or paying multiple application fees to land one home,” reports Bloomberg. “Now, particularly in pandemic boom markets such as Las Vegas and Phoenix, the application piles have thinned out and listings are lingering longer.”
In short, if people don’t have the money, they don’t have the money, so it’s not surprising that vacant units are sitting longer on the market.
The US is entering another period of ‘stagflation’ in which inflation, caused by excessive money printing, is combined with a stagnant economy.
“Once money is created out of ‘thin air’ and employed in the economy, it sets in motion an exchange of nothing for something. This amounts to a diversion of real wealth from wealth generators to the holders of newly created money,” wrote the Mises Institute. “In the process genuine wealth generators are left with fewer resources at their disposal, which in turn weakens the wealth generators’ ability to grow the economy.”
“So contrary to alternative theories, money cannot grow the economy even in the short run. On the contrary, an increase in money only undermines real economic growth.”
**By Kit Daniels