PINELLAS COUNTY, Fla. — The American dream of buying and owning your own home seems like it could be becoming more and more of just a dream, especially after this week when mortgage rates climbed the highest they have been in 20 years.
"Um, it’s very disheartening," said Giselle Reike.
Reike says she struggled while trying to buy a home in Pinellas County last year.
"It’s very overwhelming. You do feel kind of lost. It's like you put all the paperwork in just to be told you got beat out by a cash offer every time," said Reike.
Since then she’s had to move back in with her parent to save money.
"I was living downtown but with the rent increase and 7 percent mortgage rates, I just can’t afford a house right now," said Reike.
And many are in the same boat.
This week, the average on the 30-year mortgage rate jumped to over 7 percent (7.08%).
Last year at this time, rates on a 30-year mortgage averaged a little over 3 percent (3.14%).
That means if you are to buy a home for $400,000, which is about the going price for a home in the Tampa Bay area, and you give a 3 percent down payment, you’d be paying about $1,000 more a month than last year.
Greg McBride, a financial analyst with BankRate.com, says buyers have been hit with a double whammy with the rates jumping and home costs skyrocketing in Florida.
"As if a nearly 50% run-up in home prices over the last year wasn’t enough, we’ve now seen the fastest increase of mortgage rates in history and the impact that has on affordability is the same as a 35% increase on home prices," said McBride.
McBride says the Federal Reserve drove rates up to slow down buyers and try to stop inflation prices from soring.
"This just may not be the time to buy, particularly if it means stretching beyond what you can afford," said McBride.
This could be why the latest report from RentCafe.com found that renting in the U.S. is at the highest level in half a century.
But Ryan Bogden, a realtor with Keller Williams, says right now, buyers have negotiating power with demand going down.
"The line in the industry right now is merry the home and date the rate, so if you absolutely love the home and can afford it, get the house because you’re going to be able to refinance in 12-24 months, the industry is in agreement that rates are going to come back down," said Bogden.
Bogden says when the rates do come down, the market will flood with buyers, likely making it harder to negotiate the price.
"For anyone who is nervous about getting into homeownership, I would say do your homework and find proper representation and have a conversation with an agent and a mortgage lender; having a conversation is not going to put your back against a wall to make a decision," said Bogden.
But for now, Reike says she’s going to wait until prices come down and more homes are available.
"I can’t really afford anything right now, so I’m just waiting it out," said Reike.
