The dramatic rise in home prices and mortgage rates in the early months of 2022 has had a relatively limited effect on wealthy buyers and sellers, but has had a severe impact on lower-income Americans—and the Democratic Party may pay a steep price for their frustrations in the November midterm elections and beyond, according to real estate analysts and commentators.
Average payments on mortgages went from 3 percent to 5 percent in the first three months of the year, and are now 38 percent higher than a year ago, according to a Politico report citing figures from real estate listing service Zillow.
Partly because of inflation, the average rate on 30-year mortgages this week hit 5.46 percent, the highest figure since August 2009, according to Bankrate statistics.
Rates are up across the board, including 30-year fixed rates, 15-year fixed rates, and 5/1 adjustable-rate mortgage (ARM) rates. As of April 2022, the median home price in America stood at $344,141, a 20.9 percent leap from a year before, Zillow states.
Inflation, driven by the pandemic and other factors including the government’s expansionist monetary and fiscal policies, has contributed to adverse market conditions where lower-income voters whom the Democratic Party claims to represent have it the hardest. The sharply rising mortgage rates, compounded by an inventory shortfall, are driving many prospective buyers out of the market, experts say.
Lower-End Buyers Bear the Brunt
Some who work in real estate say that the competition for a limited number of houses has reached levels that they have rarely seen in years, and affects lower-income buyers above all.
“I think it probably does disproportionately affect the lower end. If you’re at the higher end of the market, and rates are in the 4s or 5s, that’s not a crazy number. But if you’re trying to get in, a fluctuation in the interest rates can price you out and make you not able to compete with the cash developers,” said Zachary Schorr, a real estate attorney based in Los Angeles.
“The real estate market has been going up and up, outpacing income. As that disparity keeps growing, it becomes increasingly difficult for the lower end to get into entry-level homes,” he said.
