2022 is a bad year to buy a house, with each cost increasing

Many families will have to accept a lower standard of living if they move in 2022.

30-year fixed-rate mortgages averaged 4.67% last week, according to Freddie Mac, the federally backed mortgage lender. The rate is 1.24 percentage points higher than last year.

A family looking to spend $2,000 a month on housing last March could have bought a house worth $450,000. With higher interest rates, they can only afford a $375,000 home. Rising prices mean that a $375,000 home today would have cost just $300,000 last year.

“Rising inflation, escalating geopolitical uncertainty and Federal Reserve actions are pushing rates higher and weakening consumer purchasing power,” Freddie Mac’s analysis concluded. “In short, rising mortgage rates, combined with continued appreciation in home prices, are increasing monthly mortgage payments and rapidly affecting buyers’ ability to keep up with the market.”

Finding an affordable home is also becoming difficult. The median single-family home price, which reflects the mid-market, rose 19.3% in Houston to an all-time high of $328,000 in February, the Houston Association of Realtors reported. That’s $10,000 more than the previous record and reflects higher home values ​​across the board.

Meanwhile, the average selling price jumped 13.4% to $395,871 in February, a record high that reflected rising prices for luxury homes.

San Antonio ranked ninth on real estate brokerage Redfin’s 2022 list of US metropolitan areas where people want to move. The city was behind Dallas and ahead of Atlanta, while Houston was not in the top 10.

Home prices in the San Antonio area reflected strong demand. The median price jumped to $314,000 in February, up 19.6% from 2021 and 32.2% from 2020, according to the San Antonio Board of Realtors.

Texas cities are keeping pace with national trends, which means there are few, if any, bargains anywhere in the country. Part of the problem is demographic, part is logistical.

Millennials are now America’s biggest generation, and many are entering the parenting and home-buying phases of their lives. The strong demand for labor is also helping them recover financially from the Great Recession and the COVID-19 pandemic.

Last year, 52% of millennials lived with their parents, according to Pew Research. Today, they make up half of buyers, according to real estate site Zillow. But baby boomers are choosing to age in their single-family homes rather than moving into smaller multi-family dwellings.

Home prices have risen dramatically over the past two years, but builders are not keeping up. The Great Recession of 2008, spurred by weak mortgage lending, stifled new construction across the country.

The pandemic, meanwhile, has created shortages of critical building materials, especially in Asian countries that have suffered repeated lockdowns caused by COVID.

“Our biggest challenge today is finishing homes, not selling them,” KB Home CEO Jeffrey Mezger said on a recent earnings call. The company, one of the nation’s largest homebuilders, is experiencing shortages of HVAC systems, furnaces, garage doors, windows, cabinetry and siding.

Buyers will also find their new home’s furnishings much more expensive. Around 40% of the world’s furniture is made in China, and retailers are experiencing the same supply chain issues as everyone else.

High-tech devices rely on computer chips, which are also in short supply due to the pandemic. Consumers have compounded the problem by buying a lot of computer products while staying at home.

Homebuyers shouldn’t expect relief any time soon. The consumer price index reached 7.9% in February and few economists expect it to slow before the end of the year.

The Federal Reserve, meanwhile, will continue to raise short-term interest rates to keep inflation under control, which will translate into higher mortgage rates in the coming months.

People who can stay put. Even if you saw the value of your home skyrocket, where would you move? In the 1960s, 20% of Americans moved every year; today it’s about 12%, according to Census Bureau data.

The low mobility of the population harms the economy and makes it more difficult to find workers. People don’t move as much for work or to set up new businesses because borrowing becomes expensive. When labor does not move as freely as capital, markets become inefficient.

Politicians love to blame themselves when the economy goes haywire, but presidents and Congress have little control over constrained, competitive markets.

For those whose jobs require them to relocate this year, the only good advice is to demand as lucrative a relocation package as possible, because it’s tough there.

Chris Tomlinson writes commentary on business, economics and politics.

twitter.com/cltomlinson

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