Rising interest rates push millennials further out of US housing market

Rate spike is the latest challenge for buyers under 35: report

TRD New York /
Jan.January 13, 2017 06:08 PM

The rise in interest rates since the election is presenting yet another obstacle to young people trying to enter the housing market.

The spike has lowered the median size mortgage that borrowers can qualify for by 9 percent, according to a new report from Fitch Ratings cited by the Wall Street Journal. It’s an added burden on top of rapidly rising house prices, which means young investors need to shell out larger down payments.

The report, released Thursday, compared the average 30-year fixed mortgage rate of 4.2 percent in the first week of January, compared with the average 3.4 percent average at the beginning of October. It found the median mortgage someone under 35 would qualify for has now dropped from a maximum $120,000 to maximum $109,000.

“Many first-time home buyers have already seen their mortgage capacity eroded,” the report said, according to the Journal. “If rates continue to rise, particularly if they rise rapidly over a short time period, they could add yet another obstacle to homeownership.”

In the wake of Trump’s TRData LogoTINY victory, bond yields and mortgage rates jumped significantly. The Federal Reserve raised rates for first time during 2016 in December. Rates hit a two-year high last month, and demand for mortgages dropped significantly in the last quarter of the year.

A study released last year found 37.4 percent of young people in New York City live at home with their parents. [WSJ]Miriam Hall


Related Articles

arrow_forward_ios
Federal Reserve Chairman Jerome Powell (Photo by Sarah Silbiger/Getty Images)

Fed “not in any hurry” to raise interest rates: Powell

Fed “not in any hurry” to raise interest rates: Powell
From left: Ace Watanasuparp, SVP National Director of Strategic Sales, Citizens Bank; Alan Rosenbaum, CEO/Founder, GuardHill Financial Corp; Mark Favaloro, President, New York Association of Mortgage Brokers

Home lending in the time of corona: “Underwriting is really difficult right now”

Home lending in the time of corona: “Underwriting is really difficult right now”
Coronavirus chaos is driving lenders to safe, stable projects such as 445 West 35th Street (Credit: iStock and Google Maps)

Coronavirus chaos driving lenders to safer projects amid low interest rates

Coronavirus chaos driving lenders to safer projects amid low interest rates
Some investors continue to find U.S. commercial real estate as attractive places to park their capital (Credit: iStock)

Brexits and Bubbles: How investors view Europe’s shaky real estate market

Brexits and Bubbles: How investors view Europe’s shaky real estate market
Many are predicting a housing bubble (Credit: iStock)

Europe could be headed toward a housing crisis

Europe could be headed toward a housing crisis
Federal Reserve Chairman Jerome Powell (Credit: Getty Images)

Fed cuts rates, signaling caution ahead for real estate investors

Fed cuts rates, signaling caution ahead for real estate investors
(Credit: iStock)

Mortgage REITs were doing great — until the yield curve inverted

Mortgage REITs were doing great — until the yield curve inverted
Federal Reserve Chairman Jerome Powell (Credit: Getty Images)

As Fed mulls rate cuts, real estate enjoys the good times but fears bad times ahead

As Fed mulls rate cuts, real estate enjoys the good times but fears bad times ahead
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...