LAKE WORTH BEACH, Fla. — Another interest rate hike by the Federal Reserve this week is aimed at slowing inflation, but it's also hurting consumers and cooling off the housing market.
On Lake Avenue in Lake Worth Beach on Thursday, Rick Curtis greeted would-be home buyers in front of this Coldwell Banker office.
The rising mortgage rates are a big topic of discussion.
"Unfortunately what the fed is doing with the interest rates is hurting the middle-class people," Curtis said.
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This is crazy:
— Danny Baldus-Strauss (@BackpackerFI) September 21, 2022
If you secured a 30-year fixed mortgage on a $600,000 home at a 2.6% interest rate in 2021, you have the same monthly mortgage payment as someone that just bought a $392,000 home at today’s 6.2% interest rate.
In an effort to fight inflation, the fed is raising rates to draw down prices for consumers, but it also can cost us all money.
"It's more difficult now to find a property because what they could afford last year with income and everything is not the same this year," Nancy Uhlman, Broker Owner of the Lake Worth Beach office of Coldwell Banker Hometown Real Estate, said.
Mortgage rates now stand at about 6.2%. Last September, it was around 3.4%.
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This means that a new home buyer today is paying the same mortgage payment as one who bought a much bigger home last year. They are also paying a lot more interest, which is frightening to buyers.
"[Interest rates] were at an all-time low, historically, and I try to put them in perspective," Curtis said. “When I first bought a house many years ago, 9.5%, that was considered to be very low," Curtis said.
"The consumer is so strained," Greg McBride, Bankrate.com chief financial analyst, said. "The Fed still has more to do, not just this year but into 2023, as well."
The rising rates mean borrowing money costs more, and it's especially true for mortgages.
"The run-up in mortgage rates we've seen has cut buying power by a third, and that’s on top of the strong price appreciation we’ve seen in the last couple of years," McBride said.
Buyers now are forced to try to expand their search requirements for a home to try and keep monthly mortgage payments down.
"We're kind of in a tough pickle right now, but we try to work together to make it happen," Uhlman said